“Pan Am Collections worked magic on some stubborn accounts I accumulated over the last year. They were able to collect on a surprising percentage of old invoices I had just given up on.” -Dave A., LTTI
Maybe It Is Time to Hire a Collection Agency
Your company has performed contracted work, extended terms, and yet those invoices remain delinquent. When is it time to hire a collection agency? At some point, usually when invoices are 120 days past due, it becomes necessary to hire a collection agency. If you wait longer, you are far less likely to recover the debt. There is a correlation between aging invoices and the probability of seeing your money. Invoices depreciate with time, like any asset. The more that passes, the lower the chances become of recovering your debt. Generally, it’s time to start thinking about hiring a collection agency if:
- New customers ignore your initial attempt to collect the debt. When you do not have a history and past transactions with the customer, there’s a good chance they will refuse to pay or never intended to.
- You’ve set up a payment plan, but the customer does not adhere to the tenets of the agreement. Customers who won’t pay after you’ve agreed to meet them halfway with a payment plan are, in most cases, not planning on paying the the debt.
- A customer completely denies responsibility for the debt. Without a collection agency, these debts are rarely recovered.
- The debtor makes spurious complaints about your business, product or service as an excuse not to pay. These complaints are just an excuse to get out of paying the debt.
- The customer is going through a serious personal situation such as a divorce. Often, one spouse blames the other for the debt. A collection agency will be able to get to the bottom of who’s responsible.
- The customer has a long history of being financially irresponsible.
At this point, a collection agency may be your best chance of recovering any portion of the past due invoice.
Here is the problem, though: How do you hire a quality collection agency that is reputable and effective?
Find the right kind of collection agency for your debt. Does the agency work with businesses or private individuals? Do they have a record of effective debt collection? What is their success rate on unpaid invoices? All of these factors are important if you are to succeed.
What are the fees associated with collecting your debt? There are several different models of recovering debt and you should evaluate which methodology is going to be most effective for you. Some firms use a fixed cost pricing structure, which others work on a percentage basis. It is imperative to understand all costs associated with the collection of your debt and utilize the one that best fits your personal need.
It is important to authenticate the legitimacy of a collection agency. Different states and localities have different rules for debt collection agencies. Make sure the one you want to hire is bonded, licensed, and adheres to the rules of the Fair Debt Collection Practices Act.
These are just a few of the considerations that should enter into your decision to retain a collection agency. We will consider many other factors as we progress in this series of articles.