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Five Questions to Ask Before Choosing any Business-to-Business Collection Agency
In an era of economic uncertainty and tight corporate budgets, many businesses find themselves looking for a strong collection agency that can help them reign in their outstanding business-to-business debts. In many cases, these B2B debts account for a significant majority of a company's debt. Being able to collect on them can lead to major changes in budgetary wiggle room that can prevent things like laying off employees, reducing working hours, and a large number of other negative effects.
The need to collect these debts has led to a thriving B2B collections industry that is full of companies offering to collect debts in a fair, but tough, way. That's all well and good, but not all of these companies offer the same level of service, the same fair fee structure, and the same commitment to their clients, that others do. Before choosing any B2B collection company, be sure to ask five critical questions about their pricing, services, and qualifications when doing so.
1. Is the company a member of an official trade organization governing collection agencies?
The number one indicator of a reliable collection company is that they've been admitted into at least one national trade organization that governs collection agencies during B2B or other collection activities. These national organizations typically lend their seal of approval only to those companies that demonstrate the highest commitment to obeying laws and regulations, fairly interacting with debtors, and producing real results.
Before contracting with any collection company, make sure that they're a member of at least one national organization that lends them some certifiable credibility. Without it, choosing a company can largely amount to a gamble. As a rule, of course, gambles should never be taken with a company's finances and collection accounts.
2. Does the company offer a fair fee structure for business collections?
Collection agencies are businesses, too, and they're looking to make a profit each day of the week. They all charge fees, and they're all looking to benefit from the debts they're asked to collect. Collection agencies, though, should still charge a fair right to their customers without causing financial hardship during the collection process. Look into the percentages charged to outstanding debts, as well as any flat fees charged during the process, to determine whether selecting the agency would be a good financial step for the company.
3. Where is the collection agency licensed to do business?
In the United States, a collection agency must be licensed to perform collection activities on a state-by-state basis. This license is received only after a collection agency has applied for it, demonstrating a commitment to local laws and regulations that govern their own activities. Because business-to-business debts typically occur between companies located in different states, this is an absolutely essential part of the collection agency "shopping" process.
For truly global companies, it's worth checking into whether or not the agency maintains accredited overseas operations in the countries where it is most needed. International business debts can be collected, but specific licenses and physical offices are required to do so. At the opposite end of the spectrum, for hyper local companies, a collection agency licensed in just one state may do the trick. Be sure that the agency can produce results in every location needed.
4. How does the collection agency collect its debts and make contact with the debtor?
While there are a large number of laws and regulations that govern when, how, where, and why a company can collect a debt, these laws still vary and allow for quite a bit of differentiation between companies. Businesses need to choose a collection agency only after they understand how that agency will contact a debtor and collect the debt. Will written contact happen first? Will an in-person visit happen? How will contact be made throughout the process?
Generally speaking, collection is more effective when the contact between the debtor and the collector is more personal. Those agencies that use personal tactics are the best choice. Those that use impersonal, harassing tactics, however, are a bad choice for businesses of all types.
5. Are the agency's employees well-trained for all collection types?
Collecting a debt is subject to numerous laws and regulations, especially the federal Fair Debt Collection Practices Act. This act legislates who can collect a debt, who can be contacted in pursuit of collection, and what information can be discussed during the process. If an employee violates this act, the debtor may not have to pay a cent to the company that they owe. Furthermore, legal action can be pursued against the agency and potentially against the original owner of the debt.
Be sure that any collection agency has well-trained employees who understand the laws that govern their employment and approaches. If not, move on.
Pick a Strong Agency with Real Results
With the above five questions answered satisfactorily, it's possible to pick an agency that is strong, fair, and effective, providing a great way to reclaim unpaid debts and reduce the tightness of corporate budgets.