Making of a successful debt collector
Consider your AR balance. Is it higher than you’d like in these difficult economic times? Managing positive cash flow and client receivables is a vital aspect of running a successful business. And, if you’re like most businesses, maintaining good client relations, keeping your customers happy and coming back is also a top priority.
Unfortunately, without an effective debt collection practice in place, many businesses suffer high delinquency rates with increased write-offs and diminishing cash flow. This can lead to:
- Doing nothing and suffering greater financial consequences
- Shifting staff from doing what they do best to making debt recovery calls
- Hiring a debt collection agency to do it for them
Can we agree the first option, doing nothing, is an indefensible position when it comes to managing your business profitably? Trying to do it in-house incurs added (payroll) costs, potential loss of productivity in other areas; and may undermine efforts to maintain positive client relations, especially if staff members are unskilled or too pushy.
That brings us to seeking outside help and what to look for in a debt collection agency. For some, just mentioning the term, “debt collection” raises red flags and makes them extremely uncomfortable. And that’s understandable; after all, the typical impression many have towards collection agencies is that they harass people, are expensive and take control of your accounts.
Sure, the industry has taken a beating due to unscrupulous, expensive and ineffective practices. And why not? As in any industry, there are people who give collection agencies a bad name. Businesses can, however, overcome the obstacles, fears and issues associated with debt collection by partnering with a professional agency that has both yours and your customers’ best interests in mind.
Here are some qualities to look for in a professional collection agency:
They take the Fair Debt Collection Practices Act (FDCPA) to heart
The FDCPA was added in 1978 as a United States Statue to Title VIII of the Consumer Protection Act. Its purposes are to eliminate abusive practices in the collection of debts by debt collection agencies and provide guidelines under which debt collectors may conduct business. It also prescribes penalties and remedies for violations of the Act.
A quality collection agency that gets great collection results will, if they’re committed to ethical standards of consumer protection, also demonstrate results in terms of customer retention and satisfaction throughout the process. Ask about their process and request examples of talking points in both written and verbal communications. Ask for and examine reference letters and testimonials of customers. Look for verbiage to the effect the agency conducts themselves in diplomatic and in non-harassing ways.
They have credible reputation, integrity and character
You should also go beyond the references they provide and their web site to look for evidence the collection agency is in good standing with the Better Business Bureau and the community at large. What’s their BBB rating and why? Are they an Accredited BBB member? (You can have a rating without being accredited.) Google their business name followed by the words reviews or complaints. What shows up? Have they won any awards? What for? If there have been complaints or negative reviews, what’s the context and have they addressed the issues? How?
Is there evidence the firm gives back to the community and is socially responsible? Not that these are deal makers or breakers for you to do business with a debt collection agency. But, catching a glimpse into their character will tell you something about how they’ll handle your clients and the relationships you’ve worked so hard to build.
Their systems, processes and people work to your advantage
While upholding the substance and spirit of the FDCPA, credibility issues, debt recovery rates and the economics of partnering with a debt collector are vital, it is also important to look at how they interface and communicate with you. Do their systems, technology, account management and people skills work the way you would most like them to? In other words, is there a business process and cultural fit?
Some debt collection agencies take total control of the collection process and collect the monies owed. Others let you decide things like how and when a customer is contacted, and the money is sent directly to you. Some deal with you via the phone, mail and email. Others may offer online client portals that make it easier for you to manage the tactical business of both recovering debt and, maintaining favorable client relations.
We’d be interested to know of your challenges and needs for profit recovery while maintaining good client relations. Feel free to post a comment on this blog, or contact us for more information on any of the services we provide.
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