This is your sign to outsource your credit collection services
We can get upset when someone does not pay what's owed to you. However, it's a bigger financial concern when it comes to business. Credit and collections can be challenging and tedious for any business to maintain. The average debt collection rate is 20-40% when using your time and resources to chase payments. However, outsourcing these services would be lucrative for larger to small companies if you consider the return on investment.
If a debt payment goes unpaid between 90-120 days, you're least likely to collect it. There is a 90% chance of collecting within the first 60 days, after which that drops to 20%. The right provider can help you recover these debts and increase your cash flow without damaging your operational cost.
Why should you hire a credit collection services provider?
If you meet the following stumbling blocks, it's time to change your credit and collections strategy.
You cannot reach new customers and spend too much time chasing payments.
Your customer has agreed to a payment but needs to follow through.
The customer denies that they owe any debt to your company.
The customer makes multiple complaints about your products, services, or company.
There is a history of bad debt on the customer.
The overarching issue is that you need more resources to collect debt, so you can focus on acquisition and other operations. If you've exhausted all your options, it is time to ask for help.
Pros & Cons of Using a collection agency
There are a host of reasons that businesses turn to collection agencies for help.
Businesses and business owners simply don't have the time. The return on having an external body far exceeds doing it themselves
An outsourcing company has the expertise and experience in collections. They are trained in effective collection strategies and techniques, which can lead to better results compared to an in-house team that may lack specialized knowledge.
It increases cash flow, allowing businesses to receive monies that would otherwise be unpaid.
You also get an objective team to be more assertive in pursuing payments.
While there are advantages, there are some drawbacks.
You lose some percentage of your debt in paying the collections agency.
You lose some control over the process as your outsourcing team now manages the collection process.
External collectors may lack an in-depth understanding of the business's products, services, or customer relationships.
While outsourced collections teams are skilled and knowledgeable in debt collection laws, there's always an ethical and legal risk if the team is overly aggressive in its tactics.
Weigh the pros and cons, then make the best decision for your business. Most businesses see excellent benefits and results from outsourcing, so here's what you need to do to get started.
Scope out your credit collections services needs.
Before shopping around for a credit and collections service, you must precisely understand your business needs. A couple of pointers to help you know would,
Figure the number of debt that you are dealing with (you probably know this already).
How long do you want your debt collection campaign to run?
If you have any special requirements or critical points that may mitigate challenges your potential partners face.
Additionally, identify pain points that you are currently facing.
After this, you should get a good feel for what you are looking for in a provider and how this provider can help you achieve your goals.
Do your research on potential service providers.
Next, start researching providers via the internet and referrals. You're seeking a good reputation and security to protect your financial data.
You may also want a nearshore provider in the same timezone that's easy to communicate with and understands the collections process.
You can develop a checklist once you identify viable candidates that meet your requirements. Check certifications and qualifications that you consider trustworthy or reputable. Approach the process as one would a job interview. Also, depending on your procurement process, you may be able to invite certain companies to bid for the contract.
For credit and collections, experience matters. A well-advertised company might sound good on paper but observe the fine details. Look for agencies that have operated in your particular field or handle similar types of debt and structure—look at cases and success stories. This can better gauge the company's performance and ability to deliver and drive success.
Is the company regulated?
Do they meet PCI compliance, legal and ethical obligations necessary for credit and collections agencies? Make sure that your options are not only licensed but meet the accreditation standards of the country. Most accredited companies can supply proof of this, but you should ask for it when procuring their services. Meeting regulatory standards is a non-negotiable requirement.
Transparency and communication
Aim to have an agency that is transparent in how they communicate. For example, what channels do they use to reach your customer? What is their escalation process? What is their reporting, analytics, and technology stack?
Next, review their payment structure to avoid any hidden costs. Do they have particular ways and means of communicating with customers? How reachable is their management team, especially if you outsource this service to another country? These are critical questions you should come prepared to ask.
What support do they offer?
Even when collecting debts, customer service is essential. Clients should still be treated with respect and dignity. Evaluate the company's NPS and other customer support KPIs. How will they balance assertiveness with respect and customer experience? What is the company's training process, and how quickly can they start learning your company's content and processes?
Time to look at the pricing.
Pricing is usually the first companies gravitate towards. However, having exceptional credit and collections services is an investment in recovering your company's revenue. If the company has a solid track record of success, weigh your return on investment, choosing the best option based on benefits and value, not cost.
Have a chit-chat!
Once you've narrowed down your best fit based on the variables we mentioned, you should meet with your top choices. This can make or break your decision, as everything, to this point, is on paper. An interview can determine other variables: culture fit, the professionalism of their operations, and expertise. Observe the procedures for yourself and understand their workflows. Some companies even allow you to visit them and do a side-by-side with their agents.
Time for a decision
You've consolidated your data and the companies and gone through the nitty gritty of your shortlisted ins and outs. Finally, you should feel empowered to make your next decision. Start by sitting with your management team and determining who best aligns with your needs based on reputation, communication, customer services, compliance, and pricing.
Sign on
Time to negotiate your contracts once you have chosen your provider and agreements. Pay close attention to key contractual considerations, and read all the fine print. Include Service level agreements (SLAs), exit strategies, and termination clauses in your stipulations. You are not just negotiating for yourself but ensuring your customers are handled with care. These expectations are documented and defined to the benefit of both parties.
Monitoring and controls
Monitoring and controlling can be tedious after engaging and rolling out this project. Set up your KPIs and monitor them closely for the first few months. Then, regularly track to assess the impact on your business. Finally, allow some corrections and adjustments to be made and collaborate as much as possible with your provider. Forging strong partnerships is essential to success.
Build a partnership that lasts.
Choosing the right company and rolling out is the hard part. But think about business continuity for a long-term partnership. Establish frequent meetings and communication. Provide continual feedback and strive for constant improvement. A strong partnership builds better reliability and stability and, therefore, more revenue for all parties.
Setting yourself up for success!
Choosing between doing collections yourself or hiring a team can be challenging. However, the benefits of outsourcing often outpace the risks. Once you've decided, choosing the right collection agency is a long process. However, once you find the right agency, you can have a long, fruitful relationship and recoup outstanding revenue, which can then be directed to growing your business.
At CallServ, we provide Back Office Solutions, including outbound debt collection. We manage the collections process, providing high-quality customer service while remaining assertive to land as much revenue as possible.
Located in the Caribbean, our team has decades of collective experience in telecommunications, customer support, and collections. Contact our team to see if CallServ can be your nearshore debt collection provider.
Comments