Action Steps
The best contacts and resources to help you get it done

Sell your bad debts to collection companies

You can use the techniques and resources that work successfully for the bill collectors industry through online services that pay the collections directly to you. Give your collections team additional resources to get the job done by bringing in the tools that serve the debt collection agencies.

I recommend: Use Inside Arm to keep up with all the information that's available to collection agency users and providers. Collection Agency Services can help to increase your collections rate with their debt collecting services and products that have been vetted. Find information you need about the services as well.

Look for an outside debt recovery firm

Let an outside agency take over your collections and pay them on a commission basis. Send your delinquent accounts to your outsourced collections agency one at a time or completely eliminate your in-house collections and send all bad debts to the debt collecting agency.

I recommend: Get connected with other professionals in the industry and find all the information that can help you understand the business through participation in the Association of Credit and Collection Professionals. In addition to referrals at Collection Agency Quotes, you can find informational articles of interest to industry providers and clients.

Turn over all bad debts to medical collection agencies

While you may have limited success collecting on bad debts, there are some accounts that are more difficult to collect than others. Often it's better to receive a partial payment than none at all. Consider cutting your losses with certain delinquent clients and taking a limited payment from debt collection agencies.

I recommend: Consider joining the Commercial Collection Agency Association to make connections and learn all about the latest news and issues that confront the industry. Another great trade group where you can find current information affecting collection agencies is the International Association of Commercial Collectors.

Helpful advice for making the most of this Guide

• •  Look for a collections agency that offers a variety of services including buying your debt, collecting slow-pays and finding debtors who have skipped out.

Guide to Finding and Using a Collection Agency

How to call in the collection cavalry before it's too late

By Daniel Kehrer, Editor, Business.com & Work.com

But recognize that the longer you wait, the less likely you are to collect your cash. According to the Commercial Collection Agency Association, your odds of collecting are this:

1. After three months: 73% probability of collecting
2. After six months: 57% probability of collecting
3. After one year: 29% probability of collecting

Bottom line for small business: Start taking action as soon as your receivables go past their due dates, and call in professional help if you aren't equipped to handle collections yourself.

Action Steps
The best contacts and resources to help you get it done

Link up with an agency that's fully certified

Commercial Collection Agency Association (CCAA) members are certified by the Commercial Law League of America.

I recommend: Find an agency in the CCAA directory; get free collection advice and check out their code of ethics.

Consider an intermediary solution

Most small businesses are familiar with D&B for credit report purposes. But D&B Small Business Solutions also offers debt collection services, including demand letters.

I recommend: D&B's debt collection services can help you collect money owed to you without alienating customers. Or hire your own outside collections department through an affiliate of the National Association of Credit Management. Search by city and state for a provider in your area.

Summon the collection pros while there's still time

Each passing month dramatically reduces your chances of getting paid. Consider bringing in a collection agency after 90 days.

I recommend: ACA International can help you find a collection agency, attorney or other professional in your area.

Locate a collection agency for a specific purpose

Approaches differ for retail, medical, commercial and other types of collections.

I recommend: At eCollectionAgencies you can select a collections category and state to find just the right type of agency for your purpose.

Helpful advice for making the most of this Guide

• •  Let customers know what your credit policy is in order to eliminate misunderstandings. Reiteration of that policy, when a payment is first overdue, is the first step in facilitating payment.
• •  Keep credit records current. Changing markets and management directions can quickly alter the health and stability of a company. Keep abreast of trade reports on specific companies, especially those which are your current customers or potential customers.
• •  Periodic review of collection policies and procedures is always beneficial. Unforeseen events can never be eliminated, but you minimize your company's chance of loss by rigid adherence to your policies.
• •  Be very particular regarding which customers are permitted to use extended payments. Too many will not only endanger your company's cash flow, but also lead to undesirable precedents as well.
• •  While partial payments may show 'good faith,' and part is better than none, the best practice is to acknowledge part payments but demand a commitment for the balance.
• •  Make sure you are getting through to the right person - the decision maker. If a visit to the customer is necessary, do it.

Action Steps
The best contacts and resources to help you get it done

Use a full-service debt recovery firm

Building relationships with your collections agency can take time and resources, making it beneficial at times to stick with one agency for all your debt collecting services. A full-service debt collecting agency will know your company well and should be proficient in all avenues of collections.

I recommend: Collection Agency Services can help you find the best collection services for your business. They can put you in touch with immediate services if you need them as well. Find out about the many aspects of debt collecting that can affect you particular industry at the Credit Builders Alliance.

Negotiate for bill collection solutions

The niche agencies become more efficient when they stay within certain industries. They can often bring more experience to the table that can help you get more from your collections. Consider hiring a collections agency that specializes in collecting debts from other businesses with the same customer base as yours.

I recommend: Find an extensive list of credit agencies as well as information guiding the industry at First Detroit. Biz Quoter offers a plethora of informative articles about the benefits and effects of working with a debt collecting agency

Get the most from debt collection agencies

There is a growing market for collection services, with new agencies opening regularly. You should consider using a stable collections agency with experience. Look for measurable results. Ask around your network for referrals to reputable and successful collection companies.

I recommend: Get quotes and find out how the companies operate with information found at Respond. Collect information, referrals and news about working with collection agencies from the experienced members of the Commercial Collection Agency Association.

Helpful advice for making the most of this Guide

• •  When you are working with a new collections agency, start out with a short-term contract to take time to measure the results. Continue the relationship only if they are producing the results you need.

Guide to Collection Agencies Key Terms

Understanding the debt-collection process and the restrictions put on collection agencies

By Michelle Cramer

Action Steps
The best contacts and resources to help you get it done

Demand letter

A demand letter is what the collection agency sends to the debtor before proceeding with a lawsuit. Basically, it states that the debtor has 30 days to either make payment arrangements or pay the debt in full. Failure to comply means it's time to go to court.

I recommend: Discover more about the construction and purpose of a demand letter from Nolo.

Skip tracing

Skip tracing is a means of locating someone who is evading collection on a debt owed. Basically, a collection agency exhausts all possible leads, including credit reports and public records, to locate a missing debtor. The more information you have (Social Security number, date of birth, middle name and so on) the more likely you are to find the debtor through skip tracing.

I recommend: Visit Collection Agency Services for more information on skip tracing. Get a better idea of what skip tracing is at Experian.

Judgment

The judgment is the court's official decision in a lawsuit. Basically, it states how much the debtor owes to your business or the collection agency on your behalf.

I recommend: Check out the information on collecting on judgments from the Legal Aid Society of Orange County, CA and the Volusia County Sheriff's Office in Florida. While collection procedures differ in each state, this information will give you a better understanding of what a judgment is and how it helps the collection agency recover the funds owed to you.

FDCPA

FDCPA stands for Fair Debt Collection Practices Act. Congress passed this act due to concerns that collection agencies were harassing debtors and leading to more bankruptcy filings. The FDCPA strictly regulates the process by which a creditor or collection agency can attempt to collect a debt.

I recommend: Find answers to frequently asked questions about FDCPA on ExpertLaw, or read the FDCPA yourself through the Credit Info Center.

FCRA

FCRA stands for Fair Credit Reporting Act. The FCRA requires collection agencies to report accurate information to credit bureaus in regard to unpaid debts. In 2003, amendments were made to the FCRA, known as FACTA (Fair and Accurate Credit Transaction Act) of 2003.

I recommend: Visit Debt Consolidation Care for more information on FCRA and FACTA.

GLBA

Collection agencies also have to abide by the GLBA, which stands for Gramm-Leach-Bliley Act. The GLBA restricts the sale of consumers' personal information, such as bank accounts and Social Security numbers. Collection agencies can use that information only for the purpose of collecting a debt and nothing more.

I recommend: The Electronic Privacy Information Center provides a lot of information on the GLBA.