In the perfect world of business, payment gets tendered at the time of the exchange. Since we live in a society where credit is vital to the success of many industries, you may need a debt collector to recoup funds.
Debt collection is a process business owners don’t want to deal with. Their employees are there to provide a service, not track down individuals who aren’t paying their bills.
To take the stress out of debt collection, you’ll need to hire a professional debt collection agency. These firms specialize in getting people to pay monies owed.
Are you struggling to get clients to pay outstanding bills? Keep reading to learn the ten questions you should ask when hiring a debt collector.
1. Can the Debt Collector Operate in All 50 States?
Businesses operating across state lines will need a debt collector service provider that is licensed to practice in all 50 states. Each state has rules and regulations governing what collection agencies are allowed to do when contacting customers. If these rules are not followed, your business could be responsible for fines and litigation.
The best debt collector service will understand the laws and not place their clients in jeopardy.
2. How Long Have They Been in Business?
Time in business doesn’t always equate to better knowledge and professionalism. However, it will give you a sense of whether the provider can handle the nuances of your business.
Collection techniques vary based on the type of collection. A doctor’s office may want to go with a medical collection agency. Medical professions can become more specialized based on the services provided.
In this instance, a dentist could seek a dental collection agency because the provider is skilled in collecting those debts.
3. What Is Their Collection Success Percentage?
Of course, if you’re outsourcing a service, you want to ensure you’re getting a good Return on Investment (ROI). Ask the provider for a breakdown of their service data. Look for success rates and compare the numbers to what you were doing internally.
Also, request a breakdown of the types of collections and client retention rates for your industry. Look for trends in service. Are their collection ratios on an upward trend over three to five years?
4. Will Our Customers Get Treated With Respect?
One reason businesses outsource collection duties is to avoid conflict with customers. Although you’re committed to getting paid for the service or work provided, you don’t want the customer mistreated.
Regardless of who is doing the collections for your business, it can reflect negatively on your brand.
Larger outlets that people rely upon for their day-to-day conveniences may not receive the same backlash as a small business. Therefore, bad reviews on Google resulting from municipal collection services and utility debt collection providers may not have the same implications.
5. What Is Your Commission?
Debt collector services are not free. The typical fee is between 25% to 50% of the amount collected. Understanding the cost of collecting on past due debts will help you determine whether it’s worth it to pursue the debt or write it off.
If someone owes you $100, and the fee is 50%, you may not see the value in pursuing that amount. Now, if your unpaid accounts are mounting, 20 unpaid accounts may become an incentive to contract with a collection agency.
Chances are your business has grown a reputation of not pursuing clients who don’t pay the bill. Changing that perception is worth the expense.
6. Is Your Agency Certified and Bonded?
Just because someone hangs out a sign indicating they’re a telecom debt collection agency doesn’t mean they’re licensed or bonded. The truth is, not all states have these requirements, although most do.
These debt collectors, depending on the state, may need to comply with the following requirements:
- Bonded
- Certificate of Authority
- Licensed
What does this mean? If you’re attempting to collect an outstanding debt, you should know the laws governing the state where the person resides. States recognize three types of debt collectors.
- First-party
- Third-party
- Debt buyers
Remember, all could apply, only one or two, or none based on the state. Choose an agency that is well-versed in state laws.
7. Which Receivables Management Software Do You Use?
In the era of technology, most companies are using software applications to make it easier to receive real-time data. A debt collector is no different. Ask if they’re using software that you can access to keep track of progress in the collections process.
Receivables Management Software (RMS) can show you when the customer was contacted, the form of communication, and the response. You can also keep track of any payments submitted towards the unpaid debt.
8. How Is the Customer’s Data Protected?
Data privacy is a high priority in any industry. Ensure the debt collection agency you choose has a data privacy policy in line with your business practices.
You also want to add due diligence regarding HIPPA laws and hiring a medical collection agency.
9. Will I Receive Status Reports?
Ask the debt collector when and how you will receive status reports on their collection efforts. Receiving reports is vital, especially if they don’t have an RMS system.
You always want to be abreast of collection efforts for various reasons, such as ongoing client services and maintaining proper in-house records.
10. How Soon Can You Begin Servicing Our Accounts?
Most debt collectors can start servicing your accounts as soon as onboarding is complete. Remember, there are rules governing debt collection that involves the age of the debt.
The agency you hire will need to determine if the proper time limits have passed for collection. In some instances, expired or dissolved in bankruptcy so the debt can no longer get collected.
Take the Hassle Out of Debt Collection
Hiring a professional debt collector will take the stress and hassle out of tracking down customers to get payments. It also helps to salvage the business relationship by using a third-party provider.
Are you in need of debt collection services? We’re here to help. Click here to learn more about First Federal Credit Control’s collection services.
