How to identify the best debt collection companies

15/09/2022

On the occasions your customers refuse to pay your invoices, avoid your calls or fail to honour payment promises, it’s incredibly useful for businesses to have a debt collection company they trust to recover payment quickly, professionally and cost-effectively.

For many businesses, debt collection companies are viewed as an extension of their credit control team, able to step in at short notice to deliver positive outcomes to sometimes difficult situations whilst removing the burden and freeing up internal resource.

But identifying the best debt collection companies in the first place isn’t necessarily straightforward, especially if you haven’t used one in the past or have had poor experiences previously. A quick Google search serves up a number of different companies to choose from, as well as ‘expert’ websites ranking debt collection companies for you – when, in actual fact, the right agency will depend on your business and the circumstances which have led you to your search.

Some, for example, will focus on consumer debt rather than commercial, whilst others will specialise in and have a proven track record in certain sectors and types of debt. There is a difference in approach, too, with some favouring constructive mediation with your customers, and others taking a much firmer stance from the off.

The key to identifying the best debt collection companies for your business is to do the research, assess the credentials of the agencies you’re looking at, understand their approach and how that ties in with your business’s ethos, and ultimately pick the one that gives you the best impression.

To help you do this, here is a list of the key things to consider when comparing debt collection companies.

A slight disclaimer, however: we, ourselves, are a specialist debt collection company. But with more than 20 years’ experience and having seen a number of agencies come and go in that time, we know what makes a debt collection company stand out from the rest. You can read more about us here.

Is the company FCA-authorised?

Regulatory bodies offer reassurance to businesses that they are working with a company that follows guidelines and upholds accepted standards.

If the debt collection company is authorised and regulated by the Financial Conduct Authority (FCA) and a member of the Credit Services Association (CSA), it’s a great indicator that they follow best practice when conducting their debt recovery activity, adhere to certain rules – particularly with regards to treating customers fairly and collecting from vulnerable persons – and generally champion high standards when recovering monies due on behalf of clients.

If the debt collection company is authorised by the FCA and a member of the CSA, this should be made clear on their website and is usually found in the footer. However, you can search for the company on the FCA’s Financial Services Register and the CSA’s member directory, as well as Companies House to verify their details.

How much experience do they have?

A well-established debt collection company with relevant industry experience can often add a lot more value to your business than companies which have only recently been set up.

Consider how long they have been trading for, what experience they have of recovering debts in your sector and the background and experience of the team and company directors. Is this information available on their website?

Experienced debt collection companies will typically be better at identifying the right approach and tone to take with customers, based on their reasons and excuses for not paying so far. They are also more likely to understand how your business operates and the nature of the debt by virtue of the fact they’ll have worked with lots of different companies in the past.

Do they have relevant case studies and testimonials?

The best debt collection companies will often be the ones with relevant and high quality reviews, testimonials and case studies.

Start by looking at the companies’ websites for soundbites and case studies. Is there a wide selection, and do they describe the steps they took to recover the payment from the customer? Are there any from businesses in your sector? Don’t be too concerned if the case studies don’t always disclose clients’ names, as many companies don’t like to reveal the fact they use debt collection companies.

Beyond that, look for external reviews provided on platforms such as Google and Trustpilot, where clients are often a bit more candid in their assessment of the services provided. It’s also prudent to search for the company name on Google to see if any negative (or positive!) stories exist about the company.

Have they won any awards?

Awards can be a good sign that the debt collection company you’re considering is reputable and well-respected in their field.

Information about any award wins would naturally be featured quite prominently on websites, but it’s worth checking the organisation behind the awards as some are more prestigious than others!

The Chartered Institute for Credit Management (CICM) holds an annual awards ceremony to champion the highest standards in the credit industry, while some trade magazines which are dedicated to the credit sector do, too.

Typically, these awards are judged on the agency’s achievements, their approach to debt collection and testimonials from clients, hence why they can be a good gauge of a company’s ability and professionalism.

What’s their preferred approach?

This is a particularly important question and one where the right answer will largely depend on your situation and expectations.

As mentioned previously, debt collection companies can differ significantly in their approaches to recovering your invoices. Some prioritise mediating with the customer to understand the reasons for non-payment before working with them to come to a satisfactory resolution, whether that’s resolving any disputes or agreeing (and then overseeing) an achievable payment plan that their client is happy with. This approach stands the best chances of preserving your all-important customer relationships, and often results in payment being made quickly as the weight of a debt collection agency alone can encourage even the most evasive customers to pay. Where this approach fails, they can then escalate to more formal, legal proceedings with the client’s approval.

Others, meanwhile, can be more heavy-handed, in that they threaten legal action immediately – while some will even visit the customer’s premises to demand payment. While this approach can work, in our experience it’s a more expensive route, with no guarantee of encouraging payment, and it’s highly likely to damage any relationship you have with your customer beyond repair and can make customers dig their heels in even further.

So it’s important to understand the debt collection company’s process and how that ties into your expectations.

How does the debt collection company charge for their services?

The majority of debt collection companies charge a success-based fee for their services, which means they earn a pre-agreed percentage of what they recover on your behalf. So, if the collections fee is 15% and they manage to recover £10,000, their services will cost you £1,500.

This structure provides peace of mind to the client, as the agency is incentivised to do a good job for you – else they don’t get paid. Typically, the older the invoice the higher the fee, so it is worthwhile engaging a debt collection company as soon as you suspect you may need external support.

Many will also charge a small up-front administration fee, which essentially covers the debt collection company’s time to set up the case and assess the creditworthiness of your customer, including ascertaining whether there are any outstanding County Court Judgments in place. Avoid paying a large fee up-front for debt collection services, however.

If you need the services of a debt collection company on an ongoing basis, or you wish to outsource the collection of a number of unpaid invoices at the same time, it may be that the overall cost is lower.

Finally, ask whether the debt collection company will look to recover statutory late payment interest and compensation on top of the invoice value. All businesses have a statutory right to charge this on unpaid commercial debts, and it may be that the agency lets you decide whether you’d like to enforce this or potentially just use it as another incentive for the customer to pay the invoice quickly.

Are they transparent?

The best debt collection companies will maintain open communication with you to keep you updated on the progress of their efforts.

This doesn’t necessarily mean daily updates, but rather many debt collection companies will have an online portal, or client area, where customers can log on at any time to check on the status. This is particularly useful where you use an agency for multiple invoices.

Make sure you check or ask if this service would be available to your business, as well as whether you would be assigned a dedicated account manager for future queries or additional instructions.

What does Hilton-Baird Collection Services offer?

We hope you have found this article useful in your attempts to identify suitable debt collection companies for your business, and would be pleased to discuss any requirements or challenges you may be facing.

At Hilton-Baird Collection Services, we have a long track record of delivering excellent results for our clients, having been providing a wide range of debt recovery and credit control services to UK businesses since 2001.

We’re trusted by a variety of clients to provide professional and effective services, from start-ups and small businesses to large corporate entities, in addition to some of the biggest lenders and Insolvency Practitioners.

As well as being authorised by the FCA and members of the CSA, we have been voted Third Party Debt Collection Team of the Year at the CICM British Credit Awards on two separate occasions, and have celebrated many success stories with our clients over the years.

If you currently have any invoices which are outstanding and you’re looking for the support of a debt collection company or credit control agency you can rely on, get an instant quote here or give us a call on 0800 9774848 to discuss your requirements.