April 2, 2015 Bookkeeping en_US It's something most business owners have to face at some time -- a client who refuses to pay a bill no matter how much effort you've put into collecting it. https://quickbooks.intuit.com/cas/dam/IMAGE/A8sanrwbw/5ba99c8123cebb51ed67631b970e31f9.jpg https://quickbooks.intuit.com/r/bookkeeping/5-questions-to-ask-before-you-hire-a-collection-agency 5 Questions to Ask Before You Hire a Collection Agency

5 Questions to Ask Before You Hire a Collection Agency

By Suzanne Kearns April 2, 2015

It’s something most business owners have to face at some time — a client who refuses to pay a bill no matter how much effort you’ve put into collecting it. At this point, you have two choices. You can write off the debt, or you can put the collection in someone else’s hands. But some business owners hesitate to turn their clients over to a collection agency because they’re afraid the agency’s actions will tarnish their business’ reputation. Here are five questions you can ask an agency during the interview process to decrease your risk.

Are You Certified?

Members of the Commercial Collection Agency Association are the only collection agencies certified by the Commercial Law League of America, and they have to pass some stringent requirements to obtain that certification. For instance, the agency must have collected commercial claims for at least four years, have a minimum of five employees, be in compliance with all state and federal laws concerning debt collections — including adherence to the Fair Debt Collection Practices Act — and be in compliance with registration and licensing laws. There is a long list of requirements necessary for an agency to become certified. You can check the CLLA’s site for a complete list of certified members.

Are You Licensed in My State?

Most states require that collection agencies be licensed in the state where they are collecting debts. If all your debtors are located in one state, it’s easy to hire an agency located in that state, but if not, you may want to hire an agency that is licensed in all 50 states. ACA International provides a list of collection agencies that you can search by state. You can also check to see your state’s licensing and bonding requirements on this state-by-state list.

Do You Specialize in My Industry?

If a collection agency specializes in your industry or niche, it already has a working knowledge of its intricacies, and that could increase your chances of getting paid. When interviewing agencies, ask them how many clients they have worked for in your industry, and what their recovery rate is for those types of clients. To find agencies that specialize in your niche, talk to professionals, such as your lawyer or accountant, or call your trade organization and ask for referrals.

How Will You Communicate With Me Throughout the Process?

For some business owners, it causes anxiety when they turn a customer over to a collection agency, and they want to stay informed throughout the process. Others prefer only to be contacted once the debt has been collected. Whatever your preferred method of communication, it’s important that the agency you select is willing to accommodate you. Ask how often you’ll be updated on their progress, and whether or not you will have an assigned contact person you can call when you have questions.

What Tactics Will You Use to Collect the Debt?

Your reputation is paramount, and you want to ensure that the debt collector doesn’t use collection methods that harm yours. For instance, refusing to negotiate if the debtor is having difficult financial times isn’t illegal, but you might not be comfortable with it. Talk to the agency about the types of methods they use when collecting debts, and then work with your contact there to devise a collection strategy you feel comfortable with.

Once you find a collection agency you want to hire, be sure to ask for references from clients in your industry. When you call them, verify what the agency told you about how they plan to communicate with you, how they treat debtors, and what their average recovery rates were. If the agency’s claims match what you hear from references, you’ve likely found the right collection agency for your business.

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Suzanne has been a full-time freelance writer for 20 years. She’s written for numerous business and financial publications such as Entrepreneur, Reason Magazine, Home Business Magazine, and Money Crashers. Read more