Does anyone have experience working with Collections Agencies?

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October 17, 2019

by a searcher from University of Pennsylvania - The Wharton School in 42111 Avenida Alvarado #2c, Temecula, CA 92590, USA

Im exploring the idea of using a collections agency to help collect AR from some delinquent customers. However, I just got off the phone with one and feel that I need a shower now. Has anyone worked with a collections agency that has an opinion to share as to whether or not they're good to use for a B2B Service company? Any pitfalls or things to look out for, lessons learned? Any collections agency you recommend using? What is a typical commission for them?

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Reply by a searcher
from University of Pennsylvania in 42111 Avenida Alvarado #2c, Temecula, CA 92590, USA
Hi Jeff. I think context matters a lot. These are a small number of contract customers, some of whom are occasionally 1-2 months late, and 1 of which is 5 months behind. I know most egregious late payer is legitimately struggling and may or may not turn it around. Id rather work it out with them peacefully and keep their future business - if possible. Obviously there is a line, which is why I am looking into this. Also, its a small community, and I dont want to be known as the service provider who is completely rigid in terms. Im dealing primarily with doctor-operators and they're known for often being a little late - its a hazard of the industry. And, it is without a doubt not stealing. At best they're struggling medical facilities, at worst they're doctors who don't honor agreements. I am unfortunately well versed in the state definition of theft and overdue AR does not come close to crossing that threshold. If it did, then Texas state prisons would be filled with medical doctors.

In general this is more of a behavior issue on the customer part, rather than cleaning up old items. If you know of an amicable way to correct the behavior part, or a way to incentivize them to be more timely with payments that doesn't significantly hurt the relationship, then please do let me know. Thats what Im looking for. Or, if you have a collections agency you can recommend (that operates within guidelines/regulations) then Id really appreciate that too. Thank you!
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Reply by an investor
from Hobart and William Smith Colleges in Dorset, VT, USA
PM me if you'd like but what is the issue? How much $, how many people. how aged? Have you fixed the problem that allows poor collection behavior and you're just trying to clean up some of the old stuff? I can get you to some quick solutions. Send me a blind AR Aging if you'd like.

You also sound a bit timid (respectfully, IMHO) on the subject. You're talking about money that people owe you? People who have stolen from you and your family. It is very offensive behavior and there is no collector in the world who can explain that better than you can. The collector will charge you 30% to be lazy and hope to get lucky on a few collections. They don't really try and they really don't care. If you respect your business you will respect your money and demand that other people do as well. If not, cut them off, file suit, file liens and move on. Glenair shuts off the US Military if they are one day past net 30. Jet fighter production will stop in the middle of a war until they are paid - I have seen it.. They are ruthless but it's their commitment to enforcing good payment behavior.

Despite the lecture, share specifics and Ill help. It should be pretty easy to clean these up and avoid future late payers.
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