One of the primary reasons that many small business owners drag their feet on hiring a commercial debt collection agency for the first time is that they are not exactly sure how the agency plans to go about collecting the debt. If you have never worked with an agency before, you will likely be curious about their standard operating procedures so that you know what to expect from working with them.
While every collection agency has a unique way of going about their business, many of them tend to follow the same broad strokes when it comes to procedure. The first phase of the collection is usually an information gathering process where the collection agency gets all of their data in line. That research phase is then followed by basic collection operations. If basic collection attempts are unsuccessful, the agency might then dive deeper and start to look at legal proceedings.
Let’s take a closer look at each of the three basic procedure phases of commercial debt collection:
The information-gathering phase of the debt collection begins as soon as you enlist a commercial debt collection agency to collect an outstanding debt on your behalf. If you do not have a previous relationship with the agency, this process will likely start with them asking about your business contact information.
From there, the agency will need to know all of the details surrounding the outstanding debt. This will include any and all documentation that you have detailing your correspondence with the debtor prior to hiring the collection agency. The agency will review all of the information regarding the debt and enter it into their collection database.
Once your collection agency has gathered all of the necessary data to pursue the collection, they will then begin the process of attempting to contact the debtor. This almost always involves a combination of phone calls and certified letters alerting the debtor that they need to make arrangements for payment.
If the debtor disputes the claim, the agency will attempt to settle that dispute in an appropriate manner. When the debtor agrees to make a payment or set up a payment plan, the agency will then follow up regularly to make sure that those payments are actually made. If the debtor refuses to cooperate in any way, then the collection may have to escalate into a legal proceeding.
Should the collection effort require legal action, most collection agencies will give their clients the option to pursue that legal action at an additional cost. Depending on the size of the outstanding debt, it may or may not be worth it to hire the necessary attorneys. If legal action is deemed unnecessary, most collection agencies will continue working the basic collection process for a period of time before closing the account as uncollected.
If you decide to go down the legal path, your debt collection agency will either have an in-house team of attorneys or they will have affiliated attorneys that they feel comfortable working with and recommending. Once those attorneys obtain a judgment against the debtor, they will proceed by locating any assets that the debtor might have and placing liens and garnishments against the debtor where necessary.
As you can see, the standard collection agency procedures are pretty much the same steps you would take if you were to go about attempting to collect the debt on your own. The key difference is that most commercial agencies have far more experience collecting debts than you do. Hiring a debt collection agency allows you to let someone else worry about collecting so that you can focus on running your business.