Aside from the disadvantages already mentioned, there are
a number of things you should be aware of as regards debt
collection services:
Don't shop for the best price. Make sure the collection
agency is long established, financially stable and creditworthy.
By transferring your collections task to an agency you are
in effect extending credit to the agency. You must be certain
to receive payment from them. Beware of the less reputable
collection agencies. Some of their methods are unprofessional
and unethical.
CSA affiliation. Make sure the agency is a member
of the Credit Services Association (CSA). These agencies
have to work within specific guidelines.
"No collection, no fee policy". You should not
have to pay if your debt is not collected.
Minimum charges and handling charges. Look out
for minimum charges per invoice and handling charges that
become due if you withdraw the invoice collection from the
agency.
Reputation and references. The debt collection
agency will be a critical interface with your customers.
Make no compromises. Work with a reputable firm to eliminate
all risk of negatively influencing your customer relationship.
Ask for references. Check if the collection agency is a
member of the Credit Services Association.
Personalized service. Particularly if you are a
small company; make sure to have a customer service team
available for you.
Exports collection capability. If you export,
make sure the agency has an own network, or affiliate partners,
in your customer's country to provide on the spot collection.
Credit insurance. Most collection agencies offer
insurance to protect you from bad debts.
Chose the debt collection agency according to your
customer profile. Whether your customers are other businesses
or individuals is an important criteria in choosing your
collection agency. Some agencies, for example, do not collect
against individuals.
Transfer restrictions on your outstanding invoices.
Make sure there are no existing contractual arrangements
that do not allow you to transfer your outstanding invoices
to a debt collection agency. (For example, a loan that is
secured by your outstanding invoices).
