If you’ve followed a clear collections policy, you should be able to collect many delinquent accounts on your own. Still, there will be the occasional debtor who won’t pay. In these circumstances, you may need to utilize the services of a collection agency to handle aging receivables.

Collection agencies can be quite effective, but their fees often carry a steep price—up to half of an outstanding debt—so it pays to comparison shop when choosing a firm. Also, since the agency represents your business, you want one that operates professionally and within the letter of the law. Use the guidelines outlined below to help you select the right agency for your business.

Get referrals

As with most professional resources, start your search for a collection agency by asking for referrals. Your accountant, attorney or other professional advisors should be able to provide references to collection agencies they regularly work with. You also can speak with colleagues to find out their experiences with local providers. Finally, if you can’t get a reference from a business associate, try contacting a national or regional collection professionals association for a list of members serving your area. You’ll find contact information for these groups in the Resources section.

Look for reputable affiliations

Agencies that are affiliated with reputable national groups such as the American Collectors Association or the Commercial Law League often must subscribe to certain ethical standards or conduct codes. This kind of certification may ensure that the agency acts in strict compliance with the Fair Debt Collection Practices Act and other regulations.

Consider a collections attorney

Many businesses work with a collections attorney instead of a collections agency. Many of these professionals offer services similar to agencies for comparable fees, but also represent you in court if you need to go that route.

Ask how they locate deadbeats

One area where collection agencies can be particularly helpful is in locating deadbeat clients – either those who skip town on a debt, or those who move and inadvertently forget to pay a bill. Make sure the collection specialist you use has skip-tracing services to locate these debtors and their assets.

Find out about specialties and coverage

Just as you want an accountant who understands the subtleties of your particular industry, you want a collections agency that knows the needs of businesses such as yours. For example, collecting for a retailer requires a different set of skills than business-to-business collections. Also, find out each firm’s geographic coverage. Does the agency you’re evaluating have a local focus or can it pursue debtors on a national basis? If it’s local, ask if it has affiliations with other collections specialists across the country.

Compare agency performance

To check collectors’ effectiveness, compare the performance of two or more over a few months time. Divide your overdue bills into equal batches, and give each agency one batch. Monitor collection performance over two to three months, then tally which agency gets the best results.