Getting paid is one of the most difficult tasks for a company, but also one of the most important. If your customers don't pay you on time, you risk cash flow problems. Opting to track your billing through a debt collection company can save you time. Taking advantage of this professional expertise also allows you to focus your resources on running your business and relieving pressure on your internal finance team.
The profession is regulated and collection companies are regularly checked. But how do they work? And especially, how to choose the agency that best suits your company's needs and values?
What is a Debt Collection Company?
A debt collection agency refers to an entity or institution that collects unpaid or overdue debts from individuals or businesses. Many businesses of all sizes use the services offered by debt collection companies. These companies offer various useful services such as pre-litigation advice, amicable and judicial recovery. They are remunerated via fixed costs and/or commissions on the amounts recovered.
How do collection agencies work?
Generally, the companies transmit to the collection company the contact details of the debtors and the invoices due. The collection company then takes various steps, amicable or not, to recover the amounts due. It pays back the amounts collected to the company, after deducting its fees and commissions. Most collection agencies operate on a contingency fee basis, which means that they are paid primarily on the amounts recovered.
It is not always easy to navigate between the different collection companies and the variety of services offered.
Here are five tips to keep in mind when choosing a collection agency:
1- Find out
Debt collection companies often specialize in certain areas. For example, some excel at obtaining funds from large companies while others are more successful at recovering from smaller companies. Look for a company that specializes in your type of business, experienced in collecting debts in your industry and the type of amounts owed. Get information on the internet, on social networks but also from your colleagues, your accountant or your banker.
2- Choose a recovery method that suits you
Collection regulations vary from country to country. The methods used by collection companies, although respecting the legislation in force, vary according to their vision, their corporate culture, their CSR or their experience in the sector. Choose a collection company with values and a commercial approach close to that of your company. This will guarantee that your invoices are collected in line with your company and your reputation.
3- Analyze their pricing
Each collection company has its pricing system. Some agencies charge fixed collection costs, the prices of which vary according to the amounts to be recovered or according to the number of invoices transmitted. Some offer advantageous rates in the event of group purchases. Many charge commissions, a percentage on the amounts recovered. This percentage may vary depending on the type of recovery to be made or the invoice to be recovered. Ask for an offer adapted to your needs and compare.
4- Track your outstanding payments
It is important for you to be regularly informed of the progress of your files being collected. In certain sectors of activity, it is imperative to release your customer/debtor, to authorize a new order or to reactivate the service provided. Generally, you receive regular statements. But some collection companies also provide you with online access to the files transmitted, which allows you to follow step by step, 24/7, the follow-up of your unpaid bills.
5- Find a partner, not just a supplier
As with any supplier or business relationship, choose a reliable and trusted partner. A transactional relationship is good, but not enough. A business relationship is built with partners at your side, experienced and attentive to your specific needs. You are going to entrust the sensitive, financial or even personal information of your customers (remember to warn your customers of this eventuality). You wouldn't want to entrust them to just anyone. Work with a company you can trust that treats your customers with respect even when they're overdue.
You now have analysis keys to make your choice.