By: Tom Gillespie, President – Access Receivables Management
One piece of good news we hear in 2020 when reaching out to prospective clients is “Our collections are good.” Some of them say they don’t need a collection agency or are not making changes due to remote working. When times are good, it’s a good time to do some forecasting and investigate new opportunities. We really don’t know what’s in store in 2021. New stimulus will help but the longer the pandemic and the dysfunction around new stimulus legislation hangs around, the greater the chance for a downturn in the economy. We all want to be agile and be ready to handle any spikes in our business as well as our personal lives.
Now is the time to consider your plans for 2021. Do they include a professional debt collector?
The debt collection industry in 2020 is comprised of over 4,000 firms in the US and they generate over $20 Billion in revenue. They return over $150 Billion to creditors annually. They employ over 160,000 people. Banks, insurance carriers, utilities, governments, schools, hospitals and commercial B2B companies all depend on their agency partners to help them complete the collection cycle and return money that would otherwise go uncollected. Yet, many smaller companies (under $1Billion) do not use collection agencies and have a total in-house process that lacks completion. They have their staff chasing accounts that are more than likely – not going to pay. If those same resources were focused on the earliest stage delinquent accounts, they would have far better results. In collections the goal is to save the customer from write-off and salvage the relationship. Here is an example:
For the first 90 days of the collection process, you should be working in your name and trying to save the customer from write-off. After the 90th day, it is time to employ a professional third-party debt collector. They are going to invest the dollars in finding your customer, reaching out and collecting. They can also provide legal services where required and or report the debts to the credit bureau with your approval. This is a complete process that also makes sense. Did you know that some delinquent customers won’t pay until they get the first call from the debt collector? If you do not have the help of a professional third party debt collector, many creditors will simply ignore you until you go away. Here is an example of a good process to follow:
- 0-30 Days – Internal outreach with email weekly.
- 31-60 Days – Internal Outreach with email and 1 phone attempt per week
- 61-90 Days – Internal Outreach with 2 phone call attempts per week – Review for credit decision
- 91-120 Days – DECISION Time – Stop the bleeding – Stop services until balance is paid – place for collection with professional debt collector
- 121-360 Days – Agency attempts to recover the money using their resources (not yours). They make the investment in people, process and effort.
Final decision to litigate, report to credit bureau or even sell the debt if the account is unresponsive where appropriate
Occasionally, a creditor will tell us; “We do our collections in-house and we do not use collection agencies”. It is strange to me that a company would not complete the process of collection by also having a third-party partner after their internal staff has completed their collection efforts and leave money on the table. It may be because the perception of collection agencies is negative. In reality, you only hear about the occasional con-artist that cheat people out of money. It is the furthest thing from a real certified industry partner.
What to look for in a great collection agency?
The great companies in our business (and there are many) are sophisticated, well run, and very compliant. They hold licenses in every state they collect and certifications from various independent organizations to assure the prospective customers that they have met rigorous standards. There are several organizations I can mention but the two that come to mind are The International Collectors Association (ACA) https://www.acainternational.org and The International Association of Commercial Collectors (IACC). https://www.commercialcollector.com. Furthermore, in choosing an agency you should get a copy of their latest SOC audit (SSAE-18) to ensure their compliance with best practices, IT security and written procedures.
The agency or agencies you choose should have solid references a great reputation, an “A+” BBB rating and have the capability to service your debts wherever your debtors are located. Once you have done a little homework, you will find that there are many really great firms out there and you can have confidence in entrusting them with your debt collection needs.