The M&PCS Guide to Choosing a Collection Agency
The Case for Professional Collections
Does the following sound familiar?
You provide professional services and/or products in a timely, courteous manner at a fair market value. You deserve to be paid. In fact, the continued success of your business depends on this spirit of fair exchange.
Occasionally you are faced with a customer who cannot, or, will not pay. There are a number of ways to handle the situation. You could waste valuable staff time in an attempt to resolve the situation. Or, you could hire a respected professional firm to do what they do best, collect what is owed to you.
When viewed in this light, it seems pretty simple. Hire the best you can afford for the professional services you require. Medical & Professional Collections Services is the tri-state’s (Illinois, Indiana & Kentucky) premiere collection agency. We welcome your inquiries and would be honored to be of service to you.
When to Choose a Collection Agency
The partnership with your collection service provider can realize the highest return on investment your company ever makes. Reputable collection agencies work primarily on a contingency basis and require no up front investment from you. Quite simply, if they do not collect for you, they are not paid.
There are a number of factors to consider in when and how to choose a collection service. Perhaps the most important is the "law of diminishing returns". The following illustrates the results of recent studies on the recovery potential per dollar on past due accounts:
| Days Past Due |
Recovery Potential |
| 30 |
.97 |
| 60 |
.90 |
| 180 |
.67 |
| 1 year |
.45 |
| 2 years |
.23 |
If you are ready to start increasing the recovery potential of funds owed to you, we respectfully provide this guidance in what you might want to consider.
As in any professional relationship, getting the most from your collection agency requires cooperation and clear communication. Following are some of the areas which may assist in your choice.
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The Basics
You probably want an agency that represents you and your business in a professional, responsible manner. You want a good recovery rate while your public image and customer good will are maintained. Some of your other requirements may be to:
- Save you time and money.
(Let your staff concentrate on what they were hired to do - not collect money owed to you!) - Collect more dollars.
- Protect your relationship with a customer.
- Provide you and your staff with continuing education on changing regulations.
- Get you out of a sticky situation.
- Understand your unique needs.
Capabilities
An experienced, professional agency should provide the following services at a minimum.
- Skip tracing to locate customers who are unavailable at addresses or telephone numbers in your files.
- The ability to forward accounts to affiliates for customers who have relocated.
- Technological expertise.
- Electronic data transfer capabilities.
Other services may also be available through collection agencies. These might include:
- Billing services
- Business administration
- Accounting services
- Pre-collect services
- Consulting, etc.
Market Knowledge
Your agency should have the skills and knowledge specific to your particular industry. Many industries have unique terminology. For instance, collectors for medical entities must have knowledge of insurance requirements and medical terms. It is important to be aware of your market needs and to clearly communicate those requirements in assessing an agency's capabilities.
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Recovery Rate
In contingency collections, there is usually not an up front fee. Reputable agencies work on percentages. You will want to discuss these percentages and the agency in question's recovery rates fully when interviewing a collection agency. The percentage rate is not a true reflection of the return you can anticipate. The agency's recovery rate is a far more important yardstick. The commission rate by itself is meaningless. Your net return is the key to your decision. 80 to 90% of nothing is still nothing. 50% of your lost receivables can amount to serious money.
Procedures & Policies
Inquire about the firm’s policies, practices, training and adherence to federal and state regulations. A firm should make sample debtor letters and phone scripts available for your inspection. Though subtle, the feel of the agency and its representatives should be a good indication of its fit for your needs and its ability to mesh with your firm's personality. You can, and probably should , trust your gut instincts.
Training & Professionalism
A reputable professional collection agency will comply with all state and federal licensing and bonding laws. The length of time an agency has been in business is a bellwether of its quality. Membership in good standing in state or national trade associations are additional indicators of an agency’s commitment to ethical standards and guidelines.
Agency employees should receive on going education and training. Responsible agencies recognize the importance of professional, competent employees.
Insurance
Errors and Omissions Liability Insurance is a necessary cost of doing business for agencies. This insurance often covers the credit grantor as well as the agency. In the event of litigation, this can be extremely important. Feel free to ask for copies of policies and information on how your firm will be protected by your prospective agency's insurance.
References
Checking the references of an agency is a vital step in the selection process. In addition to checking 2 or more customer references, you might also contact the agency's competitors, and the local Chamber of Commerce. M&PCS welcomes your request for references. As the tri-state's premier agency we find our references to be one of our very best sales tools.
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