The Cost
There are trade-offs, with the costs
of any recovery effort, or using any
collection agency pure contingency,
where you pay nothing, moves all the
risks to the agency, and they must
charge more. When the contingency
fee is reduced, the fees you must pay
usually increases. When you pay a
bigger share to get your debt recovered,
there should not be any extra up front,
or other fees.
When the debt, and the debtor’s
available assets are large, you may be
able to negotiate a better rate, however
this is rare because most debtors do
not hold onto money very long.
Industry Specialization
In general, the collection process is
pretty much the same across industries.
There is no vast difference between
collecting from an importer versus
collecting from a distributor or retailer.
In some industries, however, such as
telecommunications and healthcare,
special regulatory conditions exist.
Collectors working in areas governed
by such regulations must be expert at
applying them to their handling of
your debtors.
Therefore, if your industry or customer
base is governed by specific rules and
regulations, find a collection partner
with the appropriate knowledge and
experience.
Technology
Given the current level and availability
of technology, you should expect your
agency to offer some type of online
access that lets you: view the status
of your accounts, correspond with
their collectors, and possibly even run
statistical reports on your collection
portfolio.
If you place just a handful of claims
a year, this may not be an important
issue, as long as the collectors regularly
update you on the status of each
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account. But if you have hundreds
or thousands of accounts, you will
definitely want to use an agency that
provides easy Internet access to this
information. Their ability to customize
ad hoc reports should also be a
deciding factor.
Fee Structure
A contingent fee structure (i.e. no
collection, no pay) is pretty much
standard for collections around the
world. In addition, most collection
firms use some sort of tiered structure.
Historically, fees have been based on
the amount of the account if a single
account, or the size of the collection
portfolio, the amount collected, and the
type of handling – in-house, or lawsuit
– required to be collected.
However, other factors that may be
used to set rates include: the age
of the account at engagement, the
location of the debtor, and the type of
engagement (manual or automated).
If you are only placing a small number
of accounts with the agency, you may
not be able to negotiate any special
rates. The standard fee schedules for
most firms are very similar. Some
firms, however, increase their rate
based on the age at debt.
Or, they may require an upfront
engagement fee for old accounts. If
you have a very old (more than 12
Months arrears) account, you may
want to look for an agency that does
not adjust its fee based on the age of
the claim.
The good news is the collection
industry is very competitive. So if you
will be placing large amounts of money
or a significant number of accounts,
you will have a lot of leverage. You