First bit of advice: it is important to identify bad debts early.  Then you can keep them to a minimum and have the best chance at recovery.

Your action at this point in the credit-collection procedure is the most important. What you do determines the difference between recovery or loss of any funds owed to your business. When you identify a potential bad debt, you should act promptly and decisively.  Normally, the more time your customer gets to avoid paying their debt, the less they pay on the total amount they owe.

In other words, the longer you keep the account on the books the less of a chance you have of collecting the debt. It is expensive to carry accounts that you will not be able to collect economically with your current office methods at your disposal.

To obtain the greatest possible bad-debt recovery, choose a collection agency carefully. This is important because the collection service will be handling your money in a fiduciary capacity and should be fully responsible in that respect. Also, the conduct of the collection service will reflect on your own policies and reputation.

How should I look for help?

Consider the following qualifications and credentials when choosing a collection service. Check to see whether the agency:

  • Is a member of a national trade association, membership is an indication of professional integrity.
  • Has complied with the state’s statutory requirements as to bonding or license or both.
  • Charges fees that are clearly stated and seldom subject to misinterpretation. Rates and fees are usually on a contingency basis; no collection, no charge.
  • Is able to place accounts with other collectors in other areas of the country. This is known as “forwarding.”
  • Is prepared to give the best possible effort.  However, be aware that no agency can guarantee results. If someone tells you this is possible, be careful!
  • Uses the latest technology and resources for tracing customers that have skipped and / or cannot be currently found.
  • Exhausted all reasonable means of securing voluntary payment before recommending legal action.

Along with serving the collection needs of creditors, professional debt collectors can assist credit users, including those considered to be delinquent debtors. They can help people solve problems paying bills and maintain or work towards restoring good credit reputations. Former bad credit risks can be reestablished in the credit granting community.

To get the maximum benefit from the services of professional collectors, those who extend credit should select the best-qualified agency available.  Be confident that if you select a member of the American Collection Association, Inc. (ACA) you will have obtained the service of a qualified, professional collector.

There are approximately 3,700 agencies that are currently members of the ACA, an international organization of professional collection agencies.  Since these agencies are screened before being admitted to the association, you can rest assured that you have found a reputable and skilled service.

Sections of the ACA code of ethics, under which ACA collectors operate, deal with client relationships and are significant to credit grantors. They require that all agencies:

  • Maintain a high standard of business principles. The conduct of the agency should reflect the integrity of all fellow collectors.
  • Provide a complete and efficient collection service in the area your business serves.
  • Always protect the interests of the client and give prompt attention to all matters received.
  • Obey all instructions given by the client in the handling of a claim or promptly give reasons for not doing so.   
  • Show due consideration for the misfortune of the debtor and deal with them according to the merits of their individual cases.

As a credit grantor, you have an obligation to customers and to yourself to grant intelligently and to make sure that all who are able to pay their bills do so.  By setting up regular credit granting, billing, and collection procedures, you will be able to do this.
How to Select a Collection Agency
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