Has the amount recovered by your collection agency been below your expectation or lower than the market average recovery rate of 15%-20%. Before jumping to a conclusion or firing your existing agency, below are a few things that you should evaluate or ask the “Sales Representative” or the “Customer Service Rep” of your existing collection agency to get a better understanding of the situation. You will get a fair 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 an online portal on which you can see debt collection performance reports. If not, then request them to email/mail you a debt collection performance report to get an idea how your collection results have been. If their collection results have been unsatisfactory then this is a good way to get their attention anyway. Did your agency offered you any kind of collection guarantee, was it accomplished?
2. Are they performing “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.
3. Did the agency 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 120-180 days past due debt.
Checks for the Collection Letters Service ( Fixed fees)
4. Check the letters verbiage
Ask for a few sample letters which your collection 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 notice 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 / visits?
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, then is that breakup being printed on a separate line? If a debtor receives a breakup on the collection letter, he will understand his obligations somewhat better.
Checks for the 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 outstanding accounts. 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.
Are you partly to blame as well
10. 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.
11. 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 may include “service receipts” or invoices. They cannot continue until you provide this on time.
There could be one off factors which we have not covered. For example some of your large debtors may have filed for bankruptcy and that could be causing an overall lower performance or a high 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. But 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 collection agencies, want us to connect them with you… ? Contact us.