10 Considerations When Hiring a Collection Agency

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10 Considerations When Hiring a Collection Agency

If your business is struggling with unpaid debts, you are not alone. Most business owners find themselves in similar situations where the people that owe them are unwilling or unable to clear their debts. If this happens, you may need to hire a collection agency. Follow these 10 tips to hire a collection agency to increase your chances of recovering your money in full.

Past Experience

Hire an agency that has a high collection rate in businesses in your industry. Such an agency will understand how business is conducted in the industry and the kind of customers you deal with, thus making them better placed to work for you.

Consider the size of your business and the size of businesses for which the agency has successfully collected. Some agencies prefer working for large organizations while some like working with small businesses. Whichever agency you choose, they should have the capacity to execute your contract.

Skip Tracing

Your agency should provide skip tracing services. Skip tracing is where they track a debtor who has changed their address and contact before clearing your debt, and you are not sure where to find them. The agency should have networks with access to databases that they can use to track your debtors. Skip tracing is also helpful because it will uncover any hidden assets owned by your debtor that you can attach if the need arises.


Your collection agency should have a valid operation license to work in your state or the state where your debtor is a resident. To be safe, consider hiring one that is licensed to operate countrywide, especially if you have several debtors to collect from.

Mode of Payment

Be clear about what payment mode the agency prefers. Some agencies ask for a down payment of a percentage of the collection fee. The payment method should be clear and agreeable to you before signing the contract with the collection agency.

Do Your Due Diligence

You want to be sure you are working with a credible agency. Do a background check on them, and ask for the agency’s profile. If you can, talk to the businesses they have worked for to know about their work ethics. Whatever you find out about the agency will help you decide if they are suitable to work with you or not.


Discuss the Initial Communication with the Collection Agency

The initial communication usually informs the client that the agency is acting on your behalf. Agree if the communication will be by mail, phone call, or by a visit to the debtor by a collection agency representative. Your collection agency should operate within the law when handling your clients. You should be served with copies of all written communication between the agency and your debtors. In some contacts, the business owner approves written communication between the agency and the debtors.

Regular Updates

Your agency should update you regularly on the progress they are making in the collection process. You can schedule regular meetings or phone calls to follow up on the collection agency. The agency should allow you to be in charge of the process and the pace at which it will move.

Fair Debt Collection Practices Act

Your debt collection should understand and follow the requirements of the Fair Debt Collection Practices Act. Be sure to avoid an agency that flouts the law because such an agency could expose you to lawsuits. Some lawsuits may cost you more money than the money you intended to collect from your debtors.

Customer Service

Consider the quality of customer services that your collection agency offers. This will include their effectiveness in communicating with you and your debtors. The agency should be responsive and respectful to you and your debtors. Always note that your debtors may continue to be your clients; as such, you want to maintain a good business relationship.

Let the agency understand and respect this. Whatever the agency does, they should uphold your reputation and that of the debtor.


Your collection agency should allow you to view their financial statements and audited reports. Dishonest agencies sometimes claim debtors as capital funds. Such practices are against the law. Moreover, such actions disadvantage the business that is owed money since the agency collects the money and keeps all of it. If you find that the agency is not transparent, be cautious about hiring them.


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