Finding the Best Collection Agency: All That You Need To Do
Finding the best collection agency is not easy, but it’s possible if you know the vital factors that you need to consider. Here below are some helpful tips that will let you know exactly that which you should consider if you want to choose the best.
The rates and commissions it charges on recovery:
How much percentage will the collection agency take after successful recovery of the accounts receivable? The rate varies widely among the various collection agencies in Canada so you should discuss this with your agency.
The percentage commission rate may not be as important as the percentage that the agency takes on the amount of money you have referred to them for collection. As an example, if the turn over of accounts is $1,000 and the agency charges commission rate of 25%, if it recovers $300 from these accounts you will receive 75% of the recovered amount, which is equivalent to $225 and the agency will take 25% which is equivalent $75.
If the agency charges 35% commission rate and you refer accounts worth $1,000, if the agency recovers $300, you will receive 65% of the recovered amount, which is equivalent to $195, while the collector will take 35% which is equivalent to $105. If another agency charges 35% and manages to recover $500 out of the $1,000 worth of accounts receivables, out of the recovered amount it will take 35% (equivalent to $175) while you will get $325.
Three conclusions can be drawn from this example.
i. First, if two collection agencies have the same recovery rate, it will be cheaper if you choose that which charges lower rates of recovery.
ii. Second, it will be more beneficial to the business if you go for the collection agency that charges relatively higher rates but has higher rates of recovery because it will be able to recover more of what your business is owed, takes its percentage from the recovered amount and then give you the remainder.
Thus, what matters is not the rate of commission; it is the net return that matters.
The insurance cover that it carries:
A conscientious accounts receivables collection agency in Canada should carry E & O (Errors and Limitations) Liability Insurance. This insurance cover is important because it extends its coverage to not only the grantor of the credit but also the accounts receivable collection agency. It’s important because the creditors may be used if their collection agency violates the law in the process of chasing payments.
You should look for the collectors insurance coverage claims that the consumers have brought against the collector for interference with business, invasion of privacy, harassment, wrongful entry, wrongful eviction, slander, libel, etc. The E&O insurance cover should particularly cover Consumer Protection Laws violations that the collection agency may commit in the courses of their work.
The above two factors are very important when selecting collection agency in Canada. There are many agencies in the country, and competition among them is good for the clients because it contributes to more efficient and professional industry.
Evaluate the needs of your company against the capabilities of the available collection agencies and then choose one that will help you strengthen your business’s bottom line, helps attract and retain customers, and leads to business that is more profitable.