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Advice from Pro to Pro

Collection company: how to choose without making a mistake?

The debt collection market in France includes nearly 470 players. How do you choose the one that will recover your cash while preserving your image, your reputation and your business relationships?

COLLECTION COMPANY: ROLE AND DEFINITION

A collection company acts as a facilitator of the economy and mediates between suppliers and customers in case of unpaid debts.

It is an actor that contributes positively to the economy

It is not only a question of collecting the sums that are due, it is a question of bringing back cash quickly while preserving and making the commercial relations between suppliers and customers more fluid

…especially in times of crisis

The activity of collection companies is an essential part of our economic system. They know how to listen and find a solution through negotiation, often with constraints.

  • While the terms of payment have largely increased in the current crisis, the huge sums involved are cruelly lacking in the cash flow of companies.
  • Collection agencies help companies get paid from their customers to increase their cash flow, just as all banks give them credit when they are short of cash.

CHOOSING THE RIGHT DEBT COLLECTION COMPANY

Here are the main criteria to choose from in order not to make a mistake:

  • Deontology, ethics: check that it adheres to the Syndicat des Acteurs du Recouvrement (SAR) or the Fédération de l’information d’entreprise et de la gestion de créances (FIGEC). It is a pledge of seriousness and respect for the customer relationship
  • ISO9001 certificate: certified collection companies have implemented a quality management system focused on continuous improvement of customer satisfaction
  • The skills and seniority of the collection teams: choose a stable, experienced and identified team, preferably made up of lawyers, and offering tailor-made services
  • Transparency: check how you will :
    1. Access your files in real time and remotely,
    2. Understand the fees and charges you will be charged,
    3. To obtain the repayment of the sums collected on your behalf,
    4. Set up performance indicators and monitor them regularly.
  • If you have receivables abroad , check that your partner can operate in the areas you are interested in. Each country has its own specificities: legislation, economic context, local practices, language, culture… These numerous variables influence the path to take for a efficient international debt collection .

Please note:

  • The activity of debt collection is regulated, you can require from your provider his legal and compulsory declaration of activity at the prefecture.
  • The qualitative aspects are the only ones that can give a true indication of the future performance of your outsourced collection with the guarantee that your image with your debtor-customers is preserved. Negotiation of rates is therefore only one of the elements to be taken into account. As the Anglo-Saxons say so well: “if you give peanuts, you get monkeys”.

COLLECTION COMPANY : HOW MUCH DOES IT COST ?

In terms of pricing policy, there are two main trends:

  • Either the collection agencies are paid a fixed amount specified in the contract they offer. It is then advisable to ensure that the amount announced is final, including the “administrative costs”.
  • Either they offer success fees and choose to pay themselves out of the debts they manage to collect from the debtors.

Please note:

  • It goes without saying that the provider who is paid according to what he collects will tend to redouble his efforts in the course of his mission.
  • The fees are generally in the order of 5 to 30% of the amounts collected. The rate of fees charged by the professional will also depend on the amount, the nature and the quality of your debts, their age, their complexity and the volumes to be processed.
  • Beware of very low fees: in general, the lower the rate, the more the collection process is standardized and automated, or even without any human intervention, or even entirely conducted abroad (offshore). The higher the rate, the more local the service will be, probably of good quality, executed by collection professionals and adapted to your needs and to the necessary evolution of the possible collection strategy over time.

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