One of the main challenges many businesses face is the recovery of bad debt. Many businesses simply don’t offer any credit options. However, if you opt to extend lines of credit, it is valuable to work closely with a reputable debt collection agency. Credible debt collectors can help you avoid getting bad debt and save you the trouble of debt recovery.
Here are some tips on how to identify a credible debt collection agency in Australia.
1. Learn the Basics of Debt Recovery in Australia
Study the basic principles of debt recovery before you talk to debt collectors. This will give you an understanding of the typical terms and conditions used in the industry. Your research will help you to know the acceptable debt collection practices as well as legal limitations. This can help you to identify credible debt collection agencies.
You can start by visiting the Australian Competition and Consumer Commission (ACCC) website.The ACCC website has a dedicated page that summarises the basics of debt collection.Also, the ACCC worked with the Australian Securities and Investment Commission (ASIC) to develop the ‘Debt Collection Guideline: for Collectors and Creditors’. The guideline is easy to understand and is designed to help enforce Commonwealth consumer protection laws.
You can use what you learn from the debt collection guideline as a basis when evaluating debt collection agencies.
2. Licensing, Registration and Accreditation
It is best to work with companies that have the backing of larger professional bodies or authorities. A reputable debt collection agency should be licensed to operate in your state. In Australia, some debt collection procedures vary from state to state. You need to find an agency that is compliant with the conditions of your state.
Accreditation with professional bodies such as the Australian Institute of Credit Management can boost an agency’s credibility. Membership with recognised professional bodies is a strong indicator of is credibility.
3. Payment Terms
While rates in the debt collection industry vary, it is a common practice to work on a ‘No Collection, No Commission’ basis. This means that the debt collection agency only collects fees when it has successfully recovered your money. A ‘No Collection, No Commission’ agreement protects you from losing more money in the debt collection process. It also motivates the debt collectors to work harder to recover your money.
In the debt collection industry, it is valuable to work with an experienced team. Debt collection is sensitive and you need to know you can rely on the collectors to represent you well. The debt collectors pursue your debtors on your behalf. Anything the debt collectors in the recovery process has an impact on your reputation. If the collectors stay ethical and respectful, it can boost your company’s image.
It is significantly easier to avoid debt than to recover bad debt. A reputable debt collection agency can help you to develop practices that reduce the accumulation of debt. Prompt follow up and collection of overdue payments can also limit bad debt. If you take the time to do your due diligence, you will find a credible debt collection agency that is a perfect fit for your company.