What results should you expect from using a collection agency?

It’s a common question. What type of results should I expect from using a collection agency for my business?

If your organization has made the decision to move forward on hiring a debt collection agency, you’ll be asking some common questions. How does the process work? What does the agency need from us? And of course, probably the most popular question about what type of results you might expect.

“Results vary” as you’ve seen countless times on TV commercials in other advertisements that you are subjected to daily. And that’s important to understand when you are in the process of retaining debt collection professionals for your organization. The results you see will fluctuate, including the number of customers that can be contacted and the percentage of your customers that commit to a solution.

However, there are some basic results that you should expect.

Want to know more about managing your expectations of using a debt collection agency?

A collection agency should help you increase cash flow

Let’s face it, in the beginning you probably hired a collection agency for one reason: to collect payments from your customers that were overdue. And of course, that is essentially the function of debt collections. To increase the urgency of paying your bill and to develop a dialogue with your customers.

Once that happens, you should expect to see cash flow increase in your organization. Depending on the specifics of your industry, how quickly you can supply the collection agency with the needed information and the accuracy of that information, you should expect your cash flow to improve. While cash flow depends on other internal elements in your business, if the collection agency effectively communicates with your customers, cash flow should improve dramatically.

What percentage of the customers I send to collections pay?

This is one of those questions that can have several answers. While statistics show that collection rates have a national average of approximately 11%, you can see the percentage of customers that do pay, go far above that and sometimes below the statistic.

If you provide the collection agency with a list of customers that owe you money and that list goes back several years, you could experience lower results. In contrast, supplying your agency with a current and ongoing list of delinquent accounts will garner you more impressive results. The short answer is, the more current your list of delinquent accounts is, the more results you can expect.

Below, we will outline how to improve your collection rates with the data you supply.

Collection agencies should help you get paid faster

Every business wants to get paid faster. We all love customers who pull out their checkbook or credit card on the spot. We also realize that doesn’t always happen. If a business extends credit in any form, they will experience payment delinquencies. That is just a fact of being in business.

When you follow a well-managed debt collection program and submit delinquent accounts in a timely manner to your collection agency, you can expect to see payments come in faster. For example, if you have solid internal billing practices and a method for following up on customers that do not pay, those procedures coupled with sending delinquent accounts to your collection agency at 60 days creates urgency and will speed up payments from your customers.

But you must be diligent in submitting those accounts to your agency on time.

You should expect to keep more customers with sound debt collection practices

When your business and the collection agency you hire follow sound debt collection practices, you can expect to retain more customers and preserve those hard-earned relationships. Just because you sent a customer to collections does not mean that relationship needs to end.

You can expect increased customer retention if you do the following.

Internally, it all starts with billing on time and setting expectations about how your business needs to be paid. When a customer falls behind on payments, tactful and respectful follow-ups should be part of your accounts receivables procedures. In short, when customers do not pay, a politely worded letter informing them of their obligations to you and an equally cordial follow-up phone call should be part of your procedures.

Externally, tactful and diplomatic communications should be at the forefront of their strategy when you hire a third-party collection agency. You should only hire a collection agency that commits to treating your customers with the respect and dignity they deserve.

When these happen, you can expect to keep more customers after the collection process.

How can your business improve the results of collection activity?

Your organization might ask how your debt collection agency can achieve better results.

Better results start internally in your organization. In short the more organized you are with your internal accounts receivables program, the better results you’ll see. When you’re getting ready to retain the services of a collection agency and want to discuss results, keep these items in mind.

• Do you inform customers of your payment expectations?
• Do you invoice on time and at regular intervals?
• Do you follow up on time with delinquent customers?
• Do you follow basic accounting and accounts receivables procedures?
• Do you keep meticulous accounts receivables records, and can you generate up to date reports?
• Do you have contracts or letters of agreement with customers?
• Do you wait too long to implement collection activity? Example, 6 to 12 months and beyond.

If your organization has a solid and timely accounts receivable program, you can expect better results when using the right debt collection agency.

Want results? Be prepared.