Aging Invoices Piling Up? Choose a Debt Collection Agency

June 28th, 2016

In one of my last newsletters, we reviewed what to do with aging invoices. One of my clients actually followed all of my advice and still they were unable to collect. Rather than giving up all that cash, she hired a debt collection or debt recovery company.


If you have a client, or more than one client, who owes you money, then you should consider hiring a company to help you collect what’s owed to you. You will have to pay the company a fee, but if they can collect what you couldn’t, then it could be worth it. But before you hire a debt collection agency, here are some things you should do:

  • DO YOUR RESEARCH – Make sure you know the rules of the state or city you live in; each one has different rules for debt collection agencies. The debt collection agency should adhere to the rules of the Federal Trade Commissions Fair Debt Collection Practices Act, which regulates this type of business. The company also needs to be bonded, licensed and insured. Ask for proof of insurance, which in the debt collection world is called Errors and Omissions Insurance.
  • COMPARE COMPANIES & RATES – During your research, don’t be afraid to ask a company their collection success rate. This is also a good time to ask about their fees. Some companies follow a flat fee approach and ask for it up front before they begin their debt collection process. Other companies charge a contingency fee. A contingency fee means they only get paid if they collect on the debt. Most companies charge between 25% to 45% of the amount collected. This may seem like a lot, but remember, before this, you had nothing.
  • CONSIDER THE COMPANY’S SPECIALTY – Some collection agencies are more successful then others in certain fields. Ask the companies you are considering if they have a specialty. Some work with small businesses only, others are better at collecting funds from large companies.
  • MAKE SURE THEY HAVE INSURANCE – Even if you hired the company that was the best fit for you, things happen, so it’s important to make sure the debt collection agency has insurance. If the person you’re trying to collect from feels the collection agency was too aggressive or used deceptive tactics, your former or current client could sue you. In this case, you can sue the agency. That’s when knowing your agency has Errors and Omissions insurance comes in handy.

Nobody likes to get a phone call from a debt collector, and business owners don’t like to have to hire them. But not getting paid a large amount of money is even worse. So the next time you have unpaid invoices piled up, consider hiring a debt collection agency, but make sure you do your research first.

If you have other questions about invoicing, collections or keeping your books in order, please e-mail me or call us here at the Brigade Bookkeeping office. We are your go to bookkeepers for any and all needs.

4 thoughts on “Aging Invoices Piling Up? Choose a Debt Collection Agency”

  1. I like the recommendation to do your research on a debt collector. It makes sense that this could be helpful in making sure they can do a good job. I’ll have to keep this in mind because having a debt collector with unethical methods of debt collection could cause a lot of problems.

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