Choosing
a professional collection service to manage your delinquent accounts and other
related tasks is a wise decision, but where do you start? You want an
agency that will represent your organization in a responsible and professional
manner, and one that provides a satisfactory rate of recovery while maintaining
your public image. The decision involves more than just giving your business to
the lowest bidder – it requires careful consideration.
Getting the most from your collection
agency requires cooperation and strong communication. The following are some
key issues that can help businesses determine the quality of an agency and help
increase your success in the future.
Capabilities
What can the agency do for you? Collection agencies use experience and
resources to provide professional accounts receivable management services for
numerous industries.
Agencies can offer skip tracing
services to locate consumers when they can no longer be reached at the address
or telephone numbers listed on the accounts.
Many also have the ability to forward
accounts to other agencies if a consumer has relocated. You should consider the
types of technology the agencies are using and how your technology might
interface to allow for the electronic transfer of data and information. In addition, some agencies provide billing
services, including coding, processing, printing and mailing, while others
offer business administration and accounting services. Sometimes an agency
provides pre-collect services, where collectors start working an account before
it becomes past due. Other service agencies provide consulting, telemarketing,
campaign calling, reminder and follow-up appointment calls and temporary office
administration.
Market Knowledge
Make sure the agency has the skills and
knowledge needed to successfully collect on your particular type of account.
For example, collectors working in commercial collections must be familiar with
corporate terminology and indemnities, while collectors working consumer debt
collections need to demonstrate knowledge of the regulatory framework devised
by the various provinces, the lender/guarantor relationship and bankruptcy
rules related to the collection of consumer debt. It’s important for agencies
and credit managers to be aware that each collection market needs to be handled
differently.
Recovery
Discuss recovery percentages and rates.
The percentage rate of commission may be less important than the agency’s
percentage of return on the total dollars you refer for collection. For example,
if you turn over $1,000 worth of accounts at a 25% commission rate and the
collector recovers only $300, you will receive $225 from these “bad debts.” If
you refer $1,000 at a 35% commission rate, but the collector recovers $500, you
will receive $325. Even though the
commission rate is higher, your profit would be greater in the second example
because the agency’s recovery rate is higher. Remember that the commission rate
by itself is meaningless – net return is the key.
Procedures and Policies
Investigate the procedures an agency
uses to collect, including when it begins working an account, the collection
letters it uses and whether it has trained employees. Become familiar with the agency’s policies
and standards. A visit to the collection
office can be helpful and allows you to observe the operation of the
business. Compliance with the Fair Trading
Act (FTA) and other provincial legislation, regulating the collection industry,
is critical to third-party debt collection agencies. Inquire about the policies
and practices the agency has in place to facilitate compliance.
References
Another step in selecting a reputable
agency is checking references. Try to contact at least two creditors in your
industry currently using the agency’s services. Find out if the arrangement is
successful and how satisfied clients have been with the services they've received. Also, try to determine if the agency has a good reputation in the
community by contacting other credit grantors, the
Better Business Bureau or local Chamber
of Commerce.
Professional Credentials
Make sure the agency complies with all provincial
licensing and bonding laws, if applicable. Experience is often a good
indication of quality. Also, determine
if the agency holds membership in national trade associations such as ACA
International, the Association of Credit and Collection Professionals (ACA).
Members of ACA agree to comply with all federal and provincial laws and
regulations, as well as the ethical standards and guidelines established by the
association.
Training and Development
Ask if the agency’s employees receive
on-going training and education. ACA members have access to educational
materials and seminars covering all aspects of collections. Although these
opportunities are voluntary, participation indicates that the agency is
responsible and recognizes the importance of professional, competent employees.
Insurance
The purchasing of Errors and Omissions
Liability Insurance (E & O) can also be an indicator of a conscientious
agency. This insurance often extends coverage to the credit grantor as well as
the agency.
This is important because creditors can
face litigation as a result of alleged violations by their collection agency.
Look for coverage on claims brought by
consumers for wrongful acts such as libel, slander, wrongful eviction, and
wrongful entry, and harassment, invasion of privacy or interference with business. E&O Insurance should specifically cover
violations of the FTA or Fair Trade Act. Clients of ACA members can request to
see an insurance certificate for Errors and Omissions Liability Insurance.
The above suggestions are important to
consider when selecting an agency. Competition among collection services is
good for you as the client. This competition contributes to a more professional
and efficient industry. By carefully evaluating your company’s needs, as well
as the capabilities of the collection services available, you can maximize your
accounts receivable income and ensure that your customers are handled properly.
Careful selection of a third-party
collection agency strengthens your bottom line and helps you retain customers,
leading to a more profitable business.
ACA is an international trade
organization with approximately 5,300 members including, third-party collection
agencies, creditors, attorneys and vendor affiliates. Headquartered in Minneapolis , ACA serves members in the United States , Canada
Today, as a key source of information
for the collection industry our commitment to our members and their professions
shows through in our emphasis on leadership, innovation and information. For
more information visit ACA’s Web site at http://ww.acainternational.org.
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