Collection Agency Evaluation

In evaluating a Commercial Collection Agency, the creditor, the company involving the agency on their behalf, should consider the following criteria:

  1. Level of professionalism
  2. Business references
  3. Management background
  4. Handling of funds/accountability
  5. Legal associations

1. HOW WOULD A CREDIT MANAGER DETERMINE THE PROFESSIONAL LEVEL OF A COMMERCIAL COLLECTION AGENCY?
One of the best indications of business professionalism is the specific handling of individual accounts. Agencies maintaining a reputation for harassment or "strong-arm tactics" seem to believe this approach is the most effective way to collect money; however, these tactics can expose a creditor to unwanted legal problems and general ill-will in their industry.

 

The creditor should be aware of the specific approach being utilized by their agency. The most effective collection approach takes into account the fact that this is a commercial transaction and maintains communication on a business level. A creditor can usually determine the nature of the collection action by specific reporting provided by the agency. A professional commercial agency prides itself in its reporting to creditors. This reporting should indicate the agency is taking an aggressive approach; however, it should also indicate accounts are being handled in a business-like manner.

 

2. WHAT VALUE SHOULD BE PLACED ON BUSINESS REFERENCES IN EVALUATING A COMMERCIAL AGENCY?
Every Commercial Collection Agency should be able to provide a list of reputable customers who utilize the agency's services on a regular basis.

These references should make a specific point of identifying the contact at the business so the prospective client can easily obtain the specific information regarding the handling of claims, the length and nature of the business relationship, legal involvement an other areas that would provide the inquiring creditor with answers as to how their claims will be handled.

 

3. WHY IS THE BACKGROUND OF THE MANAGEMENT IMPORTANT TO THE CREDITOR?
A creditor should be assured the individuals at the agency management level have the credit credentials necessary to service accounts as an extension of the credit manager's own department. It is important that agency management have the credit and collection background enabling them to make effective recommendations and provide specific solutions to problems encountered in the day-to-day collection of commercial accounts.

 

4. HOW DOES THE AGENCY HANDLE FUNDS AND WHAT IS ITS ACCOUNTABILITY?
Since an agency will maintain creditors' funds in their account on a regular basis, the handling of these funds is an important issue in the overall evaluation of a Commercial Collection Agency. Creditors should have knowledge that a trust account is maintained, that funds are deposited in this account and paid out on a timely basis once it is confirmed the checks have cleared the bank.

Creditors should review the bank reference provided by the agency which will provide them with some insight as to how banking relationships are maintained.

 

5. HOW DOES THE AGENCY HANDLE ITS LEGAL ASSOCIATIONS?
A creditor usually wants to proceed with some type of legal action should the agency be unsuccessful in its efforts. The agency selects the attorney and acts as a legal liaison between the creditor and the attorney until the matter is eventually resolved. In this regard, a creditor wants to be assured the best possible legal representation is being selected.