By Delisa Maney, CPB
Account Executive at Transworld Systems
I recently started working for Transworld Systems, the nation’s largest collection agency, after being a practice manager and practice management consultant for several years. As a consultant, my main focus was accounts receivable and I sometimes acted as a biller to get practices back on track. I used a conventional collections agency when accounts were at 90 days or more past due with varied results. I figured that the low success rates had to do with the nature of the debt and was happy if I got anything at all back. Sure, it was annoying to have to pay 25 – 35 percent to the collections agency but what choice did I have? Because of the nature of the agreement we had with the agency, even if the patient sent the check directly to me, I still had to fork over the agency’s percentage. I thought this was just a necessary evil. Boy, was I wrong. Below are the three most important lessons I have learned from working inside a collections agency.
Lesson # 1: Your percentage-based collection agent is a bounty hunter.
When a conventional, contingency-based collection agent gets your debt, it is prioritized. The collector of course only gets paid if he or she is able to get the debtor to pay. So, they will look through the debt they have been assigned and then focus their efforts on the debt that has the biggest payoff. That means that if your debt is relatively small, say less than $800, you will get the minimum effort from a collector. That usually means a letter and maybe a phone call. If there is no success, the agent moves onto bigger game where more money can be made.
Lesson #2: You know that great, low percentage rate you have negotiated with your conventional collections agency? It’s actually hindering efforts being made to collect your debt.
The less money the collector can make from your debt, the less interest there is in working to get that debt paid. The collector will move on to other accounts where there is a bigger cut. Your small percentage with your small balance is simply not in the collector’s best interest where there is bigger debt with a bigger payoff somewhere else.
Lesson #3: There is a cheaper and more effective option. Use a flat fee agency.
There are some agencies, such as Transworld, that work on a flat fee basis and the entire amount of the debt goes directly to you. So for example, if a patient owes $100 and pays $100 you get the entire amount. The patient will pay you directly. The flat fee (anywhere from $6 to $16) covers the cost of collections so the money can go straight to you. The difficult thing for many to wrap their head around is the notion of paying BEFORE the debt is actually collected. The easiest way to explain this reasoning is to compare the debt cycle to a disease. If a doctor saw a patient and was sure he had a serious disease, but the patient wasn’t responding to a cure for that disease, would a doctor continue indefinitely with the cure that wasn’t working? Of course not. The physician would intervene as early as possible with another proven cure to eradicate the disease. Debt behaves in the same way. The longer debt festers, the harder it is to cure. Flat fee agencies are able to provide you with the same, or in many cases better, service for a much lower cost than conventional agencies because they 1) encourage their clients to act on debt earlier in the cycle and 2) have worked out the lowest possible cost to recover the debt (the proven cure) and then charge you for the actual work that is done. With many flat fee agencies a certain amount of work is guaranteed so you don’t have to worry about the bounty hunter getting distracted with bigger game. Since the flat fee doesn’t change, the actual percentage of money paid to collect the debt goes down as the value of the debt rises. A small balance gets just as much attention as a large balance, so overall recovery rates tend to be higher as well.
Additionally, some agencies such as Transworld Systems also provide portals where you can track the progress of an account and create reports you can later use for tax purposes.
So, the next time you are submitting debt to your conventional collections agency, ask yourself, “Do I want a bounty-hunter or a debt specialist?” If you want the specialist with proven and guaranteed results, use a flat-fee agency such as Transworld Systems. If you want to roll the dice, stay with your current conventional percentage-based agency and hope for the best.
If you are in the Rome, NY area and would like to know more about Transworld Systems, please contact Dick Neary at 941-350-9918 or firstname.lastname@example.org. If you live in any other part of the United States, please direct your Transworld System inquiries to me at 773-349-1261 or email@example.com.
Delisa contacted us and asked about writing an article about collections. She explained that she works with Transworld Systems which we happen to be very familiar with. One of our largest offices works with Dick Neary of Transworld and has really good results with the company. So, the following article was written by Delisa and we agree with what she has to offer.