By Renee Karr
You may think that using an agency will cost you up-front money. In reality, a contingency agency does not charge anything unless you are paid. There are no 'up-front costs' with a contingency-based agency. You may also think that placing a past due account with an agency will 'lose your customer' forever. In reality, it may save your customer! Choosing the right agency
There are several types of collection agencies: commercial agencies and consumer agencies, as well as Ccntingency agencies and non-contingent agencies. Make sure to use a commercial / contingency agency for your business accounts:
Contingency Agencies do not charge any money up-front, so you do not have to worry about throwing any more ‘good money after bad.’ Avoid an agency that wants you to pay something up-front, or requires you to pay for ‘coupons’ etc., before any money has actually been collected. Choose an agency that only makes money if they succeed in recovering your delinquent receivables.
Commercial Agencies are much better equipped to collect from the companies that owe you than a ‘Consumer’ (retail) agency. A good commercial agency will have the ability to perform the essential and effective tasks required to get the job done. For example, a good commercial agency not only sends letters but will be in contact with the debtor the same day the account is placed for collections, while a consumer agency will simply write a letter and wait for 30 days before taking another step (and they may not even ever call the debtor).
Additionally, when it is warranted, a good commercial collection agency will make an on-site visit at the debtor’s location. Such strong approaches result in more money being recovered, faster. A consumer collection agency will never take these effective actions. Also, a superior commercial collection agency knows the ultimate resolution is to get you paid and the customer using you again; (this is referred to as ‘resurrecting the relationship”).
Use a commercial agency before an attorney
There are several logical reasons to use an agency before going to any attorney:
- Agencies are fast & no money paid upfront – The legal system is extremely slow. It is not uncommon for a lawsuit to take years to be resolved, and then there may still never be any money actually collected (there are a lot of “worthless judgments”).
- Most attorneys require money up front (“suit-fees”) to initiate a lawsuit, which means paying money regardless of if the attorney collects or not.
A good agency, on the other hand, moves quickly, and if money is collected it is usually collected fast, and with no money up-front. Additionally, if the agency is not able to collect quickly, you always still have the right to litigate, and a good agency should be able to find you an attorney that will waive the ‘suit-fees’ (the attorneys will do this for agency-referred accounts because they want the agencies to forward accounts to them). Usually, however, if a good agency is unable to collect, the account is not a good candidate to spend money for litigation anyway; the agency may find that the debtor is out of business, has filed for bankruptcy, or simply has no assets. These are not the types of accounts you would want to pay an attorney to sue. Customize the approach the agency uses
A superior agency should be able to customize the approaches they use, tailoring their efforts to your specific needs. For example, the following tactics should be available to you:
- Strong approach - you do not want to do business with them again.
- Soft approach - for a neighbor or long-term customer you want to work with again.
- Audit approach - for a ‘large’ company that has significant potential for future business (you do not even want them to know they are being collected on!)
The bottom line is; Not doing anything will cost you money and the customer because they will go to someone they do not owe money to. Properly using a good agency may get you paid and possibly create future income, all at no upfront costs to you.
Renee Karr is an Account Executive at Goldman, Evans & Trammell LLC. For more information email firstname.lastname@example.org
or call 502-354-0496.