How to Hire the Best Collection Agency in California

If a business operating in California has past due customers then hiring a collection agency in California is a great business decision to make to recover the money owed.

Often small businesses will allow customers to fall further past due without any serious effort to collect the payment. This is usually due to the fact they have no experience in collecting past due payments or aren’t comfortable with payment collecting tactics such as phone calls or sending payment demand letters.

While a business owner can write off the past due invoice as a loss, that doesn’t help soften the blow of a customer receiving thousands of dollars of service or product without paying. Small businesses depend on this revenue to make payroll and keep business operations moving smoothly.

The first time a small business needs to collect on a past due account, they often wonder how do I hire a collection agency?

Below are some important details to consider when hiring collection agencies for small businesses in California.

1. Rate of Successful Collections– The number one goal of hiring a collection agency is to recover as much money as possible. Most collection agencies will gladly tell you the rate of recovery they collect overall on all accounts place with the agency. This is a good baseline to compare all agencies you may consider in the hiring process.

2. Referrals– If a business has been operating within a certain industry for several years; they will develop a large network of friends and acquaintances. These businesses have faced similar hurdles to overcome and have probably had to hire a collection agency. Asking the business what collection agency they used and how successful they were is valuable insight that can help select the best collection agency.

3. Reviews- Online reviews can be helpful but they should also be taken with a grain of salt. Reading through online reviews can be a landmine filled with angry debtors looking to take it out on the collection agency. Most of the time you can find a few unbiased clients of the agency who used the California collection agencies to collect for the business.

4. FDCPA– The Fair Debt Collection Practices Act (FDCPA) is a federal law that limits the behavior and actions of third-party debt collectors who are attempting to collect debts on behalf of another person or entity. Make sure the collection agency is familiar with and operations within FDCPA laws to protect against any potential issues that arise when agencies break the law.

5. Customer Service– When a business is considering a collection agency in California to hire, the agencies should provide excellent service to secure a new business client. If the agency isn’t willing to provide excellent customer service early on, what will the customer service be like after a year of doing business?

How Much Does it Cost to Hire a Collection Agency?

A reputable debt collection agency in California will work on what is often called a contingency rate agreement. The agency only gets paid contingent on them collecting payment for the business successfully. Let’s take a look at an example of how contingency rate collection works below.

A Martial Arts school has past due customers who owe the school money. They contact a local collection agency in Los Angeles who offers them a contingency rate of 25%. The school agrees to the terms as they are known as the best collection agency for Martial Arts centers.

The school is owed a total of $3,000 from the 8 students that are past due. The best collection agency in Los Angeles goes to work for several weeks on collecting the past due accounts. The Los Angeles collection agency successful recovers a total of $1,600 for the school.

The agency will keep 25% of the $1,600, a total of $400. The school gets the remaining $1,200. The school can use that money to help grow and sustain the business while the agency has gained a new client and some extra revenue. This is a “win-win” situation that most sides can be happy with.

The best benefit of contingency rates is if the collection agency does not collect any money, the client owes the agency nothing. The contingency rate agreement provides motivation for California debt collection agencies because they don’t profit unless they are able to generate results.

Hiring Local Collection Agencies Can Benefit Small Businesses

While hiring a national collection agency can be the best solution for businesses with a national operation, most small businesses only operate within one city and state. If a business has customers all within California, hiring a collection agency within the state makes perfect business sense.

Let’s look at examples of how local agencies can benefit a small business.

A dental office based in San Diego has several accounts that have gone delinquent. The Dentist prefers collection agencies in San Diego as he prefers having the option to meet with the agency face to face when needed. He speaks to three collection agency in San Diego but settles with a San Diego collection agency that has extensive collection experience in the dental field.

The dental office finds excellent results as receivables continue to drop and revenues increase.

Occasionally a company will hire a national collection agency that is a large operation with tons of resources. Often times though, a small business may feel undervalued as the large agency has moved on to serving big corporations they are working with.

Companies such as HVAC or Plumbers who serve customers in large cities such San Francisco or Sacramento need quality customer service from a collection agency just as much as the big corporations. The HVAC company in San Francisco will typically see better results from hiring a collection agency in San Francisco due to the fact the San Francisco collection agency knows the local economy and will take the time to get to know the small HVAC company.

Is the collection agency licensed in California?

All states have different licensing and bonding requirements. Before selecting a collection agency, make sure the collection agency can show proof of state license if it is required in the state your business operates.

This is another benefit of hiring local, as a collection agency in Sacramento will have to be licensed to collect in the state they are based in. While if use a collection agency in Florida, they are no guarantees they are licensed.

Due to FDCPA and the ability for collection agencies to be sued, making sure a collection agency is licensed is essential. A collection agency in Oakland that is licensed and operated within the state of California with a solid business record is a much better bet than hiring some company from out of the state.

CollectionAgencyMatch can help match you with a collection agency in California that specializes in representing small businesses without having to sort through a list of California collection agencies!

Get a free quote now!