BPPG issues new checklist to help businesses choose the right Debt Collection Agent

Businesses considering appointing a debt collection agent to manage overdue accounts can now benefit from a new checklist from the Better Payment Practice Group (BPPG).

A recent survey * by one of the BPPG’s members, the Credit Management Research Centre, found that larger firms were twice as likely as SMEs to refer accounts that are less than 30 days overdue. Two thirds of the SME sample prefer to wait until debts are 60 to 120 days overdue before taking this action, compared with only 29% of the larger firms surveyed.

At whatever stage a decision to appoint a collection agent is being made, the BPPG provides the following checklist for all businesses:

1. Ensure that the debt collection agency you have chosen has a Consumer Credit Licence and Data Protection registration. Any bona fide agency will show you the necessary documentation to verify this.
2. Check that the debt collection agency belongs to a trade association such as the Credit Services Association (CSA) or other recognised industry body.
3. Check the trading record of the debt collection agency. Agencies, just like any other business, can be credit checked.
4. Check the debt collection agency’s trade association code of practice for reasonable times for return of collected monies. Any reputable agency should be happy to show a potential customer its association code of practice if requested.
5. The debt collection agency must have clear terms and conditions detailing costs, methods and indemnification.
6. Fee structures can be flat fee or percentage. These fees must be reasonable and competitive and suitable for your particular debt situation. Ensure that you ‘shop around’ to find the most appropriate agency for your needs.
7. Does the debt collection agency offer back up services such as litigation, tracing, status reporting and consulting on terms and conditions? If so, check whether their costs are controllable.
8. If your customer base includes overseas businesses, ensure that the debt collection agency has the appropriate language skills to liaise effectively with them.
9. Ensure that your contact with the debt collection agency is polite and professional. How it approaches and deals with you will reflect on how it deals with your debtors/customer base.
10. Ask the debt collection agency to provide references from satisfied clients, particularly in your industry sector. Can contact names and telephone numbers be given for verbal verification?

Stephen Lewis of the Credit Services Association and member of the BPPG commented: “Chasing overdue invoices from tardy customers can be a frustrating and time consuming task. Appointing an agent to do the legwork for you means that you are freed from the burden of chasing bad debts, leaving you to concentrate on running your business. Debt collection agencies work either on a “flat fee” basis or “no collection, no fee” basis (when charges can be between five and fifteen per cent of the amount collected), an attractive alternative to writing off the debt.”

The BPPG’s website also hosts a new template letter which businesses can use to inform customers that a debt collection agency has been appointed. Visitors can also find information about alternative means of handling problem and slow paying accounts, such as factoring and court action.

* Debt Collection Survey by CMRC of 1200 businesses.

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