Before a business hires a collection agency to manage their outstanding accounts receivable, they must decide what type of program they want to enroll into. Some agencies offer a fee based program, while other agencies work on a commission basis. There are some differences between these two types of collection programs. Client’s that choose a fee based program will pay the agency an upfront flat fee for each account placed in collections. It doesn’t matter the size of the claim, each account cost the same amount. The client must pay the fee before the agency will begin working the accounts. The fee charged is based on the number of accounts placed, usually the larger number of accounts the lower the cost per account. Client’s that choose a fee based program will be charged a fee whether the agency recovers the account or not.
Another common program used by collection agencies , such as National Asset Management is a contingency fee program. Clients do not pay an upfront fee for debt collection services. The agency would receive a percentage of any accounts that are successfully recovered. Most agencies will not charge a fee if the account is not collected. Commissioned based programs are the most economical solution for debt recovery. This also gives the agency an incentive to recover the accounts as that is how they make their money. Whatever program your business decides to enroll in, make sure the agency is professional and experienced in managing delinquent accounts.