Debts are part and parcel of business operations because there are always going to be some customers with overdue invoices. At the same time, you may have lent money to some employees, who could show incapacity to repay the debts at a certain point in time. Whatever may be accounting to your business debt, it can be utterly harmful to your business financial health. At the same time, your debts can be a ray of hope during tough times because you may be able to recover them for cash and stabilise your condition.
But this is easier said than done, because the debtors may fail to repay by just asking for money. Having a debt collection strategy in place is the best thing to do. While you can try handling it on your own, the smarter way is to hire a debt collection agency that specialises in the job. They do all that is needed to collect your business debts and charge a fee, usually, a percentage of the amount owed. Before you hire an agency, you must check some things to ensure that you can trust them to get your recovery plan on track. Here are some tips that can help.
Start with research
Before you collaborate with an agency to handle debt collection on your behalf, research some good options and gather all the facts that you need to know. Know their history and current size, to begin with. Check their track record and find out the industry niches they have worked in. Someone with experience in your industry would be the right choice because they will probably be aware of how things work. Also, be mindful of the types and sizes of businesses they have catered to till date.
Ask for reviews and recommendations
When you shortlist a few options, ask for reviews and recommendations from real clients to understand the way they work. After all, these are the professionals who will be responsible for the public image of your business. While they should be capable of getting your debts recovered, the way they do it should not tarnish your image. You would not want to spoil your long-term relationships with the debtors but would simultaneously want them to clear the dues they owe.
Check their licensing and compliance
When you hire a debt collection agency for your business, check their licensing as well because you would want to work with someone that is a legitimate service provider. Compliance with regulations is equally important in this context because it ensures that the agency follows the norms and rules laid down by the local and national regulatory bodies.
Review their process
You need to follow the right procedures as they are essential for a business debt collection strategy. Be sure to seek clarity about the practices they follow. Ideally, they should start following up the debtors with letters, emails and phone calls. In the case of no progress, they should move on to legal proceedings. While they should be firm during the process, ensure that they take a zero-harassment approach because an aggressive one could be bad for your reputation. Seek clarification on the expected timelines of recovery as well.
Ensure that they are insured
Despite the best research, you may end up with an agency that uses aggressive tactics to the extent that the debtor sues. Whether you win the case or not, you would want to ensure that you have no liability just because you hired them. Checking whether they are insured protects you from such worst-case circumstances. Therefore, you must verify that the agency is insured before collaborating with them.
Find out about the cost
Costing is another crucial factor that should influence the selection of the collection agency. You may be tempted to opt for a cheap firm, but this may not be the wisest decision. The idea is to look for a provider that assures successful recovery within optimal costs. It is equally essential to go deeper and understand their cost structures. Some firms charge contingency fees, which means that you pay only of firm recovers debts for you. Others could charge a percentage of collection amount or on a time basis.
Finally, do compare the shortlisted options based on these parameters and finalise the one that you find trustworthy enough. Before signing any contract, carefully go through the terms and conditions to get a fair idea of their process and any hidden charges.