6 Tips for Small Business to Hire a Debt Collection Agencyby Praveen Pandey MaxBPO is a leading debt collection agency
It could be too stressful and frustrating for small businesses when their clients do not pay on time or do not pay at all. Recovering the debts from the clients is next to impossible without hiring an appropriate debt recovery agency.
Debts are inevitable where the money exchange is involved. When it comes to maintaining the health of the company the most crucial thing is managing its accounts receivables (AR). Slow payments or unpaid invoices lingering around can affect a company terribly. Here's when a small business falls into a phase where it needs to hire a debt collection agency.
How unpaid invoices can result in severe financial losses?
· A large amount of cash crunch may affect normal operations.
· Delaying employees' salaries.
· Suppliers/Vendors' payments may hamper due to the client's unpaid invoices.
· Increased stressful and frustrating environment in the firm due to continuous follow-ups for payments which may result in wastage of time and money.
As mentioned above small businesses could run out of time, patience, and resources when trying to incur payments from their clients. In such cases, approaching a debt recovery collection agency is the only way out to recover the debts from the clients as they handle it with professionalism and hold expertise in it.
When is the right time when a company needs to hire a debt collections agency?
· When customers/clients go to any lengths to avoid payments.
· When clients have a large amount due for payment and make the payment at irregular intervals.
· When a regular payer turns out to stop making the payments due to the financial crisis.
Before approaching a debt recovery agency, a small business should try ways to incur the debts from their clients with varying approaches like
· Offer to settle with the client.
· Don't lose patience.
· No harassing.
· Systematic documentation.
If you're unable to fetch any results even after trying your best to incur the debts then the last and the best approach is to hire a debt collections agency.
Here are a few tips when you plan to hire a debt collections agency.
1. Pricing Structure
The first and foremost thing for a small business is to enquire and discuss debt collections agencies' pricing structure along with their success rate in collecting the debts. Debt recovery agency in India usually charges as per these three pricing models:
· Flat Fee Model:
It is a one-time payment model charged as per the contract and number of accounts that need recovery collection.
· Hybrid Model:
This one initially starts with a Flat Fee model and later on if the number of recovery accounts is exceeded then the debt recovery collection agency will charge as the exceeded accounts.
· Contingency Model:
This model is a performance-based one wherein the debt recovery services company charge only for the accounts they can collect on.
2. Communication Channels
Debt recovery services company prefers multi-channel communication approach as it can help the agency to recover its debt goals quickly. If an agency limits itself only to a call-based collections approach then it might be ineffective amidst the rapid change. Hence, in recent time’s debt collection services agency has changed its approach to multi-channel communication. The preferred channels are call-based collections along with sending collection letters, Emails, SMS, and voicemails.
3. Compliance Management
While researching for the best debt recovery agency it's always good for small businesses to check if the debt collection agency has a proper systematic compliance management system in place to keep your business safe and verified. Maintaining a strict culture of compliance with all governing laws and regulations along with having systematic collection practices is a crucial aspect for a debt collections agency.
4. Legitimacy and Insurance
Before getting into a business deal with a debt collection services firm, a company must make sure that it is bonded, licensed, and should also adhere to the rules as mentioned under the Fair Debt Collection Practices Act. Some debtors even attempt to sue the debt collection agency if they are treated unprofessionally so the agency needs to be insured as a low-risk agency will provide you the highest recovery rate within less time.
5. Skip Tracking
There are a few agencies that use 'skip tracking' practice. This practice helps the debt collection agency to locate a debtor who might have moved to another city or town. They browse through multiple databases to find out and locate the debtor. If you have been long contacting the client and he/she has ignored all your communications that is when this aspect is helpful for small businesses to know if their debt agency uses this practice.
6. Collection Updates
Your debt collection agency should have a systematic way to share the progress it has made on your delinquent accounts. You should ask the collection agency to share periodic updates on the accounts as this approach could help you recover the debts quickly. Debt collections agencies either send updates monthly or offer an online portal for you to check the progress of each account on a timely basis.
Ask these questions before choosing the right collections agency.
· Ask the agency how they track and find the debtors.
· Check a typical script an agency uses during collections.
· An important aspect these days- Google Reviews. Do check the Google Reviews of an agency before hiring them.
· Check the agency's record and rating of collecting debts.
Debt recovery could become a pushover business as recovering past dues is the biggest challenge to face for small businesses. In such cases, finding the right solution is hiring the best debt collection agency which can help to recover the revenue that otherwise could have gone in vain.
Created on Dec 14th 2020 05:30. Viewed 199 times.