Has the amount recovered by your current collection agency been below your expectation or lower than the standard recovery rate. Before jumping to a conclusion or firing your existing agency, below are a few things that you should evaluate or ask the “Support/Sales Representative” of your existing collection agency to get a better understanding of the situation. You will get a descent idea how flexible your agency is and if there has been a lapse on their part.
1. Does your agency provide “Performance Reports”
Do they have a online collections portal on which you can see debt collection performance reports. If not, then request them to email/mail you a performance report that shows how their collection results have been. If the results have been unsatisfactory so far, then you have just succeeded in catching their much needed attention and possibly their collections manager will watch your accounts more closely for the next few days/weeks. Did your agency offered you any kind of collection guarantee, was it accomplished?
2. Are they performing all the “Scrubs”?
Do they perform a “Change of Address” scrub, means may be the debtor has moved from the address in your file, but did the agency try to find out his new address. Its quite possible that your debtor has a fair intention to pay, but since he has moved to a new home and simply did not receive an invoice from you at his new address, he forgot to pay. Scrubs may not be 100% accurate all the time, but your agency should definitely perform them to improve the collection results. Are they additionally doing the Bankruptcy and Litigious debtor scrubs?
3. Did the Collection Agency representative explain their products, did they sell you the right service?
Were you explained when to use the collection letters service and/or the collection calls service? Collections letters service is best for debtors less than 120 days past due debt.
Examining their Collection Letters Service ( Fixed fees)
4. Check the letters verbiage
Ask for a few sample collection letters which your agency has been sending out to your debtors. May be you want to switch from diplomatic to intensive verbiage. Or may be your are not satisfied with their demand letters verbiage at all.
5. How is the print quality of their Collection Letters?
Are they sending letters with smudged print quality or the quality of the paper or envelope is bad, which may look more like a junk mail than a serious notice. May be next time you should hire an agency which sends demands in colored print so that these collection letters have maximum impact.
6. Does your collection agency print the break up charges?
Most agencies will total up all the charges and send it for collections. Although it is perfectly fine for collections purpose, but not 100% desirable. For example if a patient visits the doctor twice and owes $200 for the first visit and $100 for the second visit. If those two charges are printed on a separate line then the will understand his obligations far better.
Examining their Collector Calls Service ( Contingency fees based)
7. Request for a few collector logs
Collection agency will not share call recordings with you, but they should be able to provide the activity/action log of at least on a few of your accounts receivable. For example, ask the agency if they can provide how many times have they called up on two accounts which have the highest outstanding amount. Were they able to talk to the debtor or not.
8. What kind of payment options does your agency offer to the debtors
Does your collection agency have provision to allow your debtors to pay in installments. Do they accept checks and have a provision to make a online payment by credit card or any other forms of payment.
9. Do you have Settle in Full agreement in place?
An agency will try to collect 100% of the amount, but do tell your collection agency to settle accounts in a few cases where the debtor is ready to pay 80% of the amount, but cannot pay full 100% of the amount owed.
10. Will they do Credit Bureaus Reporting if you want?
Debtors often ask during a collections call “If I do not pay, will you do a credit reporting” or “Would this reflect on my credit history?“. If the collection agency indeed does credit bureau reporting of unpaid debts, then the collector should certainly reply “Yes we do, if requested by the creditor“. This puts additional pressure on the debtor. Per the debt collection laws, a debt collector cannot use Credit Reporting as a threat, but if asked by the debtor, a collector he can convey the fact.
Could “You” be behind the low recovery rates?
11. Have you been submitting accounts on time?
It is recommended to use a collection agency after 60-90 days past due, at least for the written demands service. If you have been submitting accounts which are 9 months or more than 1 year old then the probability of recovery on those accounts goes down even if a collection agency is involved. Expecting good collection rates on older accounts is an unreasonable expectation.
12. Have you been providing the backup documentation promptly when asked?
Collection agency will ask for the backup documentation from you if the debtor disputes the amount owed. This is his legal right. This may include “service receipts” or invoices. A collection agency cannot continue any further until you provide this information on time.
There could be one off factors which we have not covered. For example some of your large value debtors may have filed for bankruptcy and that could be causing an overall lower performance. Another scenario could be that a large percentage of your debtors are untraceable even after performing the Scrubs.
There is no guarantee that if you change your existing collection agency the results will be better with the next one. However, after discussion with your existing agency, you conclude that they are indeed being not up to the mark, then surely make a switch.
We have shortlisted a few good collection agencies, want us to connect them with you… ? Contact us.