Like human relationships, business partnerships are not a static ideal and occasionally there comes a time when its just not working any more and you have to break it off.
Its nothing to get too emotional about, there are in fact a wide variety of reasons why it may come time to part ways with a service provider even though they were a great choice when you retained them. Your business might outgrow them, you may begin to notice they’re not putting in the effort they once did or perhaps you weren’t such a great match to begin with. In any case, what’s important is that businesses owners are able to spot red flags and make decisions regarding service providers that promote the best commercial outcomes for their enterprise.
When it comes to debt collection firms, the same holds true. Many businesses are wooed by fast talking ambitious new firms who promise them the world but don’t live up to expectations. Others rely on reputations or recommendations from colleagues but as months or years go by, they find that the firm is for whatever reason, simply not a good fit for their needs.
The challenging part can be knowing when its time to move on to greener pastures, before any real damage is done. Make no mistake, a bad debt collection firm actually could be doing your business more harm than good. So look out for these warning signs that you might need to change your debt collection service provider.
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You’re losing clients
If you’re struggling to maintain relationships with or get repeat business from clients that your debt collector has dealt with, this may be an indication that their methods are too harsh or that they are not treating your clients with respect. Good debt collectors are sensitive to the fact that they are viewed by your clients as an extension of your business. How your debt collector treats your clients will directly impact your reputation.
If you suspect this may be a problem, discuss with your clients any experiences they have had with your debt collection firm and whether or not they were treated appropriately.
Your having budget blow outs
There’s the fee and commission structure you are given at the outset – then there’s the real cost each month. If there’s a large disparity between what a firm represented to you in terms of fees and what you are actually being charged, the firm may not be (a) as cheap as you thought they were or (b) as transparent and trustworthy with regard to pricing as they ought to be.
Having to constantly check invoices for hidden or exorbitant fees is exhausting and erodes confidence in a relationship. Having budget blowouts because actual charges are regularly exceeding estimates can also cause cashflow issues of its own.
Raise any hidden or undisclosed fees with your debt collection firm and provide an opportunity for them to provide a reasonable explanation. If this is not forthcoming, consider changing to a firm that is more transparent with regard to pricing.
Your experiencing poor recovery rates
One of the fundamental purposes of debt collection is to promote proper cashflow by bringing in amounts owing. If your debt collection agency is struggling to get timely results, they may not have the most effective technologies and tools at their disposal or may lack experience.
While it is important to bear in mind that recovery times will differ depending on the type of debt and the amount of information you have been able to provide, you can expect your collection firm to maintain a decent recovery rate overall.
Consider outsourcing a few debts or accounts to a competitor firm and compare collection times vs commissions and make a decision based on your experience with both. However a word of caution, recovery rates must never be achieved through unlawful or unethical methods or at the cost of damaging client relations.
You don’t know what’s happening with your files
If the extent of your debt collector’s correspondence is a ‘please find attached’ email with your invoice each month, listen up. Other firms can provide you with complete transparency with regard to the conduct of your files. At any point in time you can tell how your debts are being collected, what actions are being taken on a given matter and what communications have been made. Many firms these days enable clients to access this information 24/7 through online platforms.
There is also an abundance of data and reports that debt collection firms can generate which you can use to tweak your accounts receivable practices. If this data is not made available to you, you may be missing out on a huge value-add that other firms are offering.
Ask your debt collection firm whether this information is available and how you can access it. If its too hard for them, it may be worth looking for someone who can.
A strong and profitable business is built on good commercial decisions and many of those decisions concern which professional service providers to partner with. Forming a strong and enduring relationship with your debt collection firm can bring many benefits when you find the right one.