If the amount recovered by your current collection agency been below your expectation or below the standard recovery rate, it probably time to hire a new one.
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However, firing your existing agency, here are a few things that you should ask the “Support/Sales Representative” of your current collection agency to get a better understanding of the situation. You will get a decent idea of 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 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 successful their collection efforts have been. If the results have been unsatisfactory so far, then you have just succeeded in catching their much-needed attention, and now 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. Is your current agency performing all the required “Scrubs”?
Do they perform a “Change of Address” scrub, may be the debtor has moved from the address you provided them but did the agency try to find out his new address? It’s quite possible that your debtor has an honest intention to pay, but since he has relocated and just because he did not receive your invoice at his new address, he forgot to pay. Scrubs may not be 100% accurate all the time, but your agency should perform them to improve the collection results. Are they additionally doing the Bankruptcy and Litigious debtor scrubs?
3. Did the Collection Agency representative explain all their products, did they sell you the proper service?
Were you told 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 collection 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. It’s possible that you may not satisfied with their demand letters verbiage at all.
5. How is the print quality of their Collection Letters?
Are they sending letters with very average print quality, which may look more like junk mail than a serious demand notice? Maybe next time you should hire an agency that sends demands in colored print so that these collection demands have maximum impact.
6. Does your collection agency print the break-up charges?
Most agencies will total up all the charges and send them for collections. Although it is ok, 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 your debtor will understand his obligations far better.
Examining their Collector Calls Service ( Contingency fees based)
7. Request for a few debt collector logs
Your Collection agency will not share call recordings with you, but they should be able to provide the activity/action log of at least a few of your accounts receivable. For example, ask the agency if they can provide how many times have they called upon two of your accounts that have the highest outstanding balance. Were they able to talk to the debtor or not? How long did the call last?
8. What kind of payment options does your agency offer to the debtors
Does your current collection agency has the provision to allow debtors to pay in installments. Do they accept checks? Do they have a provision to accept online payment by credit card or Western Union?
9. Do you have a 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 the 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 would certainly reply “Yes we do, if requested by the creditor“. This reply 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 must 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 that are 9 months or more than one 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?
Your collection agency will often ask for backup documentation from you if the debtor disputes the amount owed. This documentation is his legal right. It may include “service receipts”, signed contracts and invoices. A collection agency cannot continue any further until you provide this information on time.
There could be one-off factors that 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 recovery rate. 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 not up to the mark, then surely make a switch.
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