All collection agencies are the same, right?
Wrong.
Collections agencies can be different in many ways including industry specialization and how they charge, not to mention customer service, transparency, and collection tactics. Some agencies may even choose to separate consumer collections from commercial collections, such as our spin off of Enterprise Recovery, because the collection processes and regulations are so drastically different. Depending on the client needs, one agency could be a better fit than others.
WHEN HIRING A COLLECTION AGENCY, BUSINESS NEEDS MUST BE EVALUATED.
An example of businesses that work with or sell to individual consumers include grocers, retailers, property managers, doctors or healthcare, banks, and utility companies. Here are more details about how they work with consumers.
Businesses that work with other businesses, also selling products or services, may include manufacturing supply and materials, consulting, software as a service, marketing, accounting or other professional services.
As evidenced by the relationship differences, commercial collections and consumer collections are also handled differently. Consumer business relationships may not be long lasting so businesses may not be concerned with losing a customer that isn't paying on time. Commercial business relationships, however, are hard fought assets so there may be more at stake when dealing with unpaid invoices or defaults on financing.
Consumer collections are also regulated by the Fair Debt Collections Practices Act (FDCPA), including limits on when and how collectors are able to track down payments owed by individuals. Commercial collections are not regulated by this federal act, however, many states require that commercial collections agencies be licensed in order to collect in those states. The state regulation may require that the agency is licensed in the state in which they're located or the state in which the debtor is located. Some debt collections agencies may opt to license in all 50 states so they are not limited in helping their business clients.
An unpaid commercial invoice has the potential to halt production of a manufacturer or determine if rent or payroll is made. On the contrary, unpaid consumer accounts are much smaller, but no less important to the business. Depending on the type of business, a collections agency must also have experience in dealing with larger accounts versus smaller accounts. Other collections differences include tracking down individuals compared to discussions with an accounting department at a larger organization, working to smooth out business differences and invoicing challenges versus reviewing individual credit or debt challenges, and lower volumes with larger balances than higher volumes with lower balances.
Depending on the type of business and the business customers, collection agencies must be researched to see if there's a good fit. For more information on how to choose a collection agency, review the following posts on the BYL Collections blog (for consumer collections) and our sister company, Enterprise Recovery (for commercial collections).
CONSUMER COLLECTIONS
Six Tips to Identify the Right Debt Collection Partner
COMMERCIAL COLLECTIONS
Tips for Hiring a Corporate Debt Collections Agency