Written by: Charles Wilson - Lovetts Solicitors, Chairman
The many advantages of using a third party collection agency or law firm to recover debt have been well documented over the years, and although there are also some benefits to having an in-house collections team, more and more companies are using third parties today than ever before.
Although the benefits are widely known, an important question that you should be asking yourself is - how do you assess the effectiveness of your third party collection agency?
Regularly monitoring the job that they do goes a long way to ensuring that this method of collection is the right one for your business and that you’re spending your money wisely. In order to carry out this assessment, you’ll be looking to focus on two key areas : qualitative and quantitative KPIs.
In business, it’s of vital importance to maintain a solid working relationship with your clients, and being able to solve a debt issue without damaging a hard earned trade relationship between supplier and customer is so important. Of course, there will be instances where the relationship has soured to the point of no return, and your primary objective is simply to recover the money owed; but when a good trading relationship can sometimes take months of hard work to create you need to know that your third party collection agency is able to salvage, or even, benefit that relationship wherever possible.
Does your collection agency offer access to their services via an online platform? This allows for greater flexibility as to when you access their services, allowing you to take care of matters outside regular working hours, or get a document, or even cost summary, in a minute or two.
If they only offer direct access via telephone or in person then how responsive are they when you contact them?
Some third party agencies assign each of their clients to a case manager or paralegal, who is the main point of contact throughout the process. This has proven to be a far more effective way of working as they become familiar with your situation, they know your business and your policies on collection. Yet they should also be part of a close team, so others can help as need be.
You may also need to consider different tactics for different customers. Can you get advice on options? Some may need the urgency of the threat of Insolvency; others may just need the escalating cost of a Court claim. Yet others, only a third party phone call to ensure the right person is reminded to pay.
Consider all these factors in order to assess how effective your DCA or law firm is when it comes to quality of service.
While the quality KPIs can vary depending on what type of support you’re looking for in a collection agency, the quantitative KPI’s are relatively straight forward.
Look at hard figures, and the results are far easier to assess. You’re going to be looking at how long on average it takes for the agency to close a case. Are your customers responding to the methods used by your third-party collector? Are they quick to follow up on communications and deal with any issues? Or do they routinely allow issues to drag on over days or even weeks, without cause?
How many cases do they manage to close in any given time period? Most significantly, what is the success rate? How much is it costing you per case on average? As a business, you’re looking to maintain that balance between a high-quality service and cost effectiveness. Are they recovering your collection costs or commissions through the legal process, if that applies?
In the end, the way in which you assess the effectiveness of your collections agency will vary depending on the type of business you run, and your own priorities and circumstances. What is important is that you routinely run this assessment, and make sure that the third party collection agency is right for you, and delivers the results you expect.
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