As a small business owner, it's important to collect payments from your customers in a timely manner to maintain a healthy cash flow. Unfortunately, not all customers pay on time or in full, which can lead to financial difficulties for your business. That's where a collection agency comes in.
A collection agency is a third-party company that specializes in collecting unpaid debts on behalf of businesses. They use various techniques to recover the outstanding amounts, such as phone calls, letters, and legal actions. However, not all collection agencies are created equal, and choosing the wrong one can lead to legal troubles or damage to your business's reputation. Here are some tips and guidelines to help you select the right collection agency for your small business.
Check the agency's credentials
The first step in selecting a collection agency is to check their credentials. Ensure that the agency is licensed to operate in your state and that they comply with state and federal regulations, such as the Fair Debt Collection Practices Act (FDCPA). You can check their license status with your state's attorney general's office or the Better Business Bureau.
Look for experience in your industry
Different industries have different payment practices and regulations, so it's important to select a collection agency that has experience in your industry. For example, if you're in the healthcare industry, you'll want to work with an agency that understands the complexities of medical billing and HIPAA regulations.
Consider their collection techniques
Collection agencies use various techniques to recover outstanding debts, such as phone calls, letters, and legal actions. You'll want to choose an agency that uses techniques that align with your business's values and customer relationships. For example, if your business prides itself on its customer service, you'll want to work with an agency that uses a softer approach, such as phone calls and letters, before resorting to legal actions.
Check their success rate
The purpose of hiring a collection agency is to recover outstanding debts, so it's important to check their success rate. Ask the agency for their success rate in collecting debts similar to yours. You can also check their online reviews and ratings to see what other businesses have to say about their success rate.
Evaluate their communication skills
Communication is key when working with a collection agency. You'll want to choose an agency that has strong communication skills and is responsive to your needs. Test their communication skills during the selection process by asking questions and evaluating their response time.
Consider their fees
Collection agencies typically charge a percentage of the amount collected, which can range from 20% to 60%. You'll want to choose an agency that has transparent and reasonable fees. Ask the agency for a breakdown of their fees and evaluate them against their success rate and your budget.
In conclusion, selecting a collection agency for your small business is an important decision that requires careful consideration. By checking their credentials, looking for experience in your industry, considering their collection techniques, checking their success rate, evaluating their communication skills, and considering their fees, you can select the right agency to recover outstanding debts and maintain a healthy cash flow for your business.
Call CCFA today at 303-351-0464 to get help with your small business debt collections.