Why Your Business Should Reassess In-House Collections and Agency Partners

Posted by Ryan Howard on Jun 3, 2022 1:18:27 PM

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If it ain't broke, don't fix it. But do you know if your collections efforts are broken?

If your business has established in-house (first-party) collections, accounts receivable and/or debt collection agency partners, it is still a good idea to ensure you're leveraging the best resources, technology, and vendor pricing available.

Here's why and how to reassess your in-house collections and B2B collections agency partners.

 

Internal: A/R & Collections Department

Your accounts receivable team may be on "set it and forget it" and you don't realize it.  It's very common to put a lot of effort into hiring the right people to create a great A/R and collections department.  Then the department loses staff, hires more, and gets so far into the work that they never stop to evaluate if they're actually effective. Here are some steps to take to measure their effectiveness:

  • Evaluate the cost of in-house collection staff including:
    • Overhead expenses
    • Salaries
    • Bonus/Commissions
    • Medical and Other Benefits
  • Cost analysis 
    • Review cost per/seat (cost per/collector) and Supervisor and/or Manager costs against performance
  • Consider the cost of turnover
    • Recruiting
    • Hiring
    • Onboarding / Training 

See also: How Effective is Your Accounts Receivable Department?

External: Collections Agency Management

Just as likely, you may have settled into a comfortable relationship with a third-party collections agency.  It can be a challenge to find the best collections agency for your business needs.  Often, once an agreement is signed, the agency is kept on retainer without re-evaluating your need for them.

Measure your collections agency's effectiveness by:
  • Frequently review their performance
  • If using multiple agencies, compare collection rates (percentage of dollars placed vs. dollars collected) and any variances between agencies
  • Consider replacing under-performing agencies with a new collection vendor
  • If using one agency, consider segmenting account placements between 2 (or more) agencies to establish a Champion vs. Challenger environment
  • Periodically get a pulse on current commercial collection agency fees and if the going rate in the B2B collection agency market has been adjusted up or down

By evaluating the effectiveness of your collections efforts as a whole, you may be surprised to find that you could save your business more money.  

As a B2B-specific collections agency, we'd be happy to help. Contact us to test Enterprise Recovery against your in-house collections or agency partners.  Learn more by clicking the button below.

COLLECTIONS + BRAND PROTECTION

Topics: Accounts Receivable, Hiring a B2B Collections Agency