The last step in an accounts receivable program – and really the one that most would prefer avoid – is placement.  This is when, after all other efforts are exhausted, invoices are handed over to a firm that specializes in collections.  Before getting into best practices when considering placement and working with a collections agency, let’s talk a bit about the market itself.

Debt collection is a $20 billion industry, this according to IBIS World.  While the industry dipped slightly in 2023, declining 0.1%, it’s been on steady incline since 2018, averaging a 1.6% per year increase.  Clearly this indicates tremendous market opportunity, which explains why there are more than 6,300 debt collection businesses in the U.S. alone.  Not surprisingly, the states that have the most of these businesses are also the ones with the highest GDP – New York, California and Texas.  In a bit of a paradox however, employment opportunities in the space are actually on the decline – predicted to slide nearly 10% by 2032. But this is due to automation in the industry and the efficiencies they deliver rather than any sort of declining demand.

Collections itself is far from a panacea, with industry experts suggesting that only about 20% of delinquent invoices are recovered.  However it remains a critical backstop in any accounts receivable program.  And the sooner you send to collections, the more likely you are to get paid.  This is why many believe that you should actually begin laying the groundwork for collections even before the deadline for non-payment is reached.

But not all collections agencies are the same – and you don’t want to throw good time and money after bad by working with someone who doesn’t deliver.  This is why you should consider the following key qualifiers when it comes to determining the collections partner that’s best for you:

• Licensed and bonded in all 50 states: You do business all across the country. So the business you use for collections should be too. If they aren’t, you are putting yourself at risk of not being able to recoup that much-needed revenue. Verify that the agency you use is licensed and bonded in every state.
• Compliance and regulations: When looking into which collections agencies you want to work with, make sure you ask about their internal compliance and regulation team. Ask questions about engagement of a third-party audit agency for independent verification of this compliance program. A little bit of legwork up front can save you from a range of legal questions down the road.
• Let experience be your guide: It’s generally a good idea to work with proven leaders. But this means asking yourself (and them) the right questions. Do they have a track record of success? Do they invest in the right technologies? Do they have the right people to do the job?  Do they know how to achieve success while remaining compliant?  Working with businesses that have the right experience can be a game changer in your placement efforts.
• Consumer & Commercial Debt: While you’re likely dealing primarily with commercial debt, it’s important to have a partner that can additionally handle consumer debt because you never know when your needs might change. So it’s best to have a well-vetted partner. 

In a 2021 survey, 44% of small business owners said that late payments are a challenge affecting their business. This makes working with a partner that understands placement all that more important because every dollar of working capital matters to your business.

With MakeGood, placement is the last in our three-step revenue recovery process: prevention, pursuit and placement. We aim to deliver for our clients by working with well-vetted professional collection agencies across the country, and we quickly and seamlessly place delinquent accounts with them after unsuccessful internal collections efforts. And businesses only pay upon successful collection.  There are no hidden fees or other charges.

As you look for a partner who can help you with your invoice recovery, consider reaching out to MakeGood. We have rebooted revenue recovery with streamlined processes, offering early payment discounts using motivational language, penalizing slow payers, and ensuring a modern payment experience. We can have you up and running on your 90-day free trial in just a matter of hours.

For more information, contact us today.