Customers Won't Pay? How to Choose a Collection Agency

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If you've been trying to recover funds from a customer who is significantly in arrears and you are at your wit's end, it might be time to consider hiring a collection agency. These services focus on recovering debts that are past due. They contact your unpaid accounts by phone, in writing and via email. In extreme cases, they may seek legal recourse on behalf of your company. And the method works – collection agencies recoup tens of billions of dollars each year.
While there are many reputable collection agencies, there's a reason the industry has earned a bad rap. Some agencies rely on unscrupulous or illegal tactics to collect money, and that's something to avoid at all costs, because it reflects poorly on your business. There are strict laws surrounding collections efforts, and any reputable agency will follow them.
Many people confuse collection agencies with debt buyers; there are important distinctions between the two. Debt buyers purchase debt for a reduced price – sometimes pennies on the dollar – and keep all of the money they collect. Collection agencies, on the other hand, are paid a percentage of any outstanding funds they recover, but they don't own the debt. When they collect a debt, they hand the money over to you, minus a certain percentage in fees.
If you're considering hiring a collection agency, it's imperative to do your research so you know what separates the good services from the bad ones and that you hire an agency that is experienced, professional and familiar with your industry. Not every collection agency will be a good fit.
Our goal with this buying guide is to save you hours of research time. In this guide, we explain when you should hire a collection service, how you can find a reputable service, the laws that apply to collection agencies and what you can expect to pay in fees.
We've also included our recommendations for the best agencies, depending on whether you're a small business, you need to collect past-due funds from a business (an agency specializing in B2B collections) or a consumer (an agency specializing in B2C collections).
Editor's Note: Looking for a collection agency for your business? If you're looking for information to help you choose the one that's right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free: