Finding the Right Collection Agency by Asking the Right Questions
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Collection Agencies: Finding the Most Reputable Agency by Asking the Right Questions


There comes a moment in every small business owners’ trade credit experience that their customer just won’t pay. Those are the moments when these owners have to make a difficult decision: do I turn to a collection agency or do I not? It’s a hard question to ask, given the aggressive reputation that is associated with collection agencies. However, at times they are the only truly effective solution available for delinquent accounts. If a small business owner is going to explore that route, there is a right way to do it. It all begins in finding the right agency, which starts with asking the right questions.

Collection Agencies: Find the Most Reputable Agency by Asking the Right Questions

As a small business owner, pursuing collection agencies can be a hard path to follow as it is the practice of putting your customers into someone else’s hands. If this is a decision you must make, use the following set of questions to research collection agencies, assuring you end up with the most reputable agency possible.

1) How long has the agency been in business?

This is an important question because the longer the agency has been in business, their history will be more in-depth, providing a track record of integrity (or lack thereof) and revealing if they remit funds to clients in a timely manner. Also, try to benchmark the agencies you are interested in with the broader market. Check that the collection agency has a separate client trust account, which should always have sufficient funds to pay all client obligations. A client trust account is necessary with collections agencies, because if a collection agency gets sued, you don’t want it affecting your money. And of course, check to make sure these collection agencies are members in good standing with industry associations, such the Commercial Collection Agency Association of the Commercial Law League of America.

2) Is the company licensed or bonded?

Commercial collection agencies are required to be licensed or bonded in most states, and it’s more assurance for you if they are. When asking about a bond, make sure the company has a “$300,000″ umbrella bond to protect assets (this amount is the minimum requirement of CCAA members). Get a copy of the bond. Licenses are also different by state, so although a collection agency might have a license in one state, it doesn’t necessarily mean it does in yours. Always ask and do your research. These states require licenses:

If your company is located in any of the following states, your collection agency must be licensed to solicit or handle your business:

–Alaska, Arizona, Arkansas, Delaware, Florida, Idaho, Illinois, Indiana, Minnesota, Nebraska, Nevada, New Jersey, New York (City of Buffalo), North Carolina, North Dakota, Oregon, Tennessee, Utah, Washington, West Virginia–

If your delinquent customer is located in any of the following states, your collection agency must be licensed to collect in that state:

–Arizona, Arkansas, Delaware, Idaho, Illinois, Minnesota, New Jersey, New York (City of
Buffalo), North Carolina, North Dakota, Oregon, Utah, Washington–

3) Does the agency work to customize their collection process and keep you informed?

Look for collection agencies that offer multiple services, such as continuance of traditional collecting AND dispute resolution negotiations. If they offer multiple services, this gives you the opportunity to work with collection agencies and construct a strategy that is ideal for your business and your customers. Also, it is important to know the collection agencies keep you in-the-know, either through phone or email updates. Having a consistent knowledge of the ground they are covering will help ease your nerves and allow you to feel more in control of the process.

4) How long does the agency hold the collected amount before forwarding funds?

Many collections agencies have tension with their clients because they don’t disclose the time period it takes to forward clients their rightful collected amounts. So you have to ask, what is the time between the amount being collected and your remittance statement? Is it forwarded immediately, semi-monthly, monthly? Is it possible to request faster service? How is the money held and forwarded? Is it secure? These are necessary follow-up questions to make sure money is delivered quickly, flexibly and safely.

Although it can never be an easy decision, acknowledging that it’s time to send your delinquent accounts to collection agencies can be a much more informed process if you learn to ask the right questions. Follow the guide above to find collection agencies that will take care of your customers, and even more importantly, get you paid.

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