When to hire a collection agency
Small Business Delinquent Accounts
Hiring a debt collection agency is a good way for small and home businesses to handle any and all delinquent bills that have been piling up.
Sometimes small or home based business owners have to deal with delinquent accounts that they must be collected on. There are many reasons that customers allow their accounts to go unpaid. Sometimes they are having financial hardships and other times they simply don’t care. This is not something that a business owner wants to think about but there is no way around it in some cases and it is always better to be prepared for the worst even when you are hoping for the best.
If your company only has an unpaid account here and there, it can typically be absorbed without any negative ramifications. However, if these unpaid debts accumulate it becomes an issue that must be dealt with accordingly. All businesses, no matter what size, can afford to have more unpaid accounts than accounts in good standing. The main goal is to make money; not lose it.
Businesses that are home based or otherwise small in size typically do not have any administrative staff to spend the time it takes to track down delinquent customers for payment. So, depending on the amount of delinquent accounts a business has, it may be smart to hire a collection agency. The rule of thumb is that the outstanding debts should reach a certain amount before it is profitable to employ a collection agency.
Following are some things to consider when hiring a collection agency:
When choosing a collection agency, you should first confirm that they are licensed and bonded under Ontario law. To do this you can contact the Ministry of Consumer Services to makes sure that they are licensed. They can be reached toll free at 1-877-665-0662.
Search for a collection agency that will be a good fit for your business. Different agencies specialize in different debt collection services. For example, if you have a home based business you want to make sure that debt collection agency you choose knows how to deal with home based business customers.
Know the debtors because collection agencies are just as different from each other as other businesses are. Find a collection agency that specializes in working with the type of customers you have. For example, if the people who have delinquent accounts are individuals (I.E. not commercial debtors) then you should find a collection company that specializes in collecting from individuals.
Learn about trace skipping technology and find an agency that employs the type of collection technique. In the event that the delinquent customer has moved and left no forwarding address or has disconnected their phone service, skip tracing can be used to locate them.
Find an agency that specializes in working with small or home based businesses as practices for larger companies may be a bit different.
Do a cost comparison. While some agencies work on commission, others charge either a flat fee of contingency fee. See which option will work best for you and keep this in mind when searching for an agency to hire.