How to choose a debt collection partner in 2024

When your company is faced with choosing a new debt collection provider, or is considering switching from your current provider—whether from a law firm to a debt collection agency or vice versa—there are a number of important factors to take into account.

At Collectia, we have many years of experience in debt collection, so we know what you, as a business owner, should keep in mind to ensure that debt collection is successful—not only for your business but also for your debtors.

In this article, we’ve compiled specific advice on what we believe you should look for in your next debt collection partner—as well as advice on what you can actively expect and demand from a reputable and professional debt collection provider.

1. User-friendly and comprehensive online platform

Although it may seem obvious, we often find that many debt collection agencies and lawyers either lack an online platform for managing cases altogether or offer a solution that is unsatisfactory and inadequate.

It is essential that you require your future debt collection provider to offer a stable, efficient, and comprehensive online case portal. Such a platform should allow you to easily monitor, manage, and close your debt collection cases.

The lack of robust online access to your cases with your debt collection partner can make it difficult and confusing to keep track of them. This can result in an increased need for manual work on your part, especially when cases are not managed through a dedicated portal.

2. Integrations with Your Debt Collection Partner

As public authorities, including the Danish Business Authority, tighten the requirements for the digitization of companies’ financial statements and bookkeeping in 2023 and 2024, it will also be important to consider which ERPand accounting software your company can and should use.

If your company is already in the process of digitizing various processes, or is considering doing so, now—in 2024—might be the time to consider digitizing your payment reminderand debt collection processes.

At Collectia, we offer a wide range of integrations with various accounting software programs and ERP systems, making it easy for you to transfer a case to collections with just a few clicks.

In addition, here at Collectia, we have our own developers. So if you have specific systems, needs, or preferences regarding how to most efficiently transfer cases to us, we’re always ready to help and tailor our solutions to your specific requirements.

3. Artificial Intelligence

The year 2023 marked a breakthrough in the use of artificial intelligence (AI) in many companies, opening people’s eyes to AI’s potential both now and in the future. It is clear that AI will revolutionize work tasks across all departments, companies, and industries.

A recent study reveals that AI is one of the primary areas of focus for top executives. This underscores the importance of AI in today’s business world. That’s why you should require AI capabilities from your future debt collection provider. If they do not have an AI-powered engine, it is important to understand how your cases will be handled. AI’s ability to identify patterns, correlations, and similarities can create a more tailored and efficient debt collection process.

The majority of debt collection agencies in Denmark use a standard procedure for the debt collection and reminder process, in which predetermined actions at set intervals are applied to all cases. At Collectia, however, we believe that no two cases or debtors are identical. That is why we have developed our own AI, CAI (Collectia Artificial Intelligence). CAI is designed to detect patterns, systems, and similarities between cases and debtors, enabling a more tailored debt collection process for your specific case.

4. Fair and Respectful Debtor Management

Look for a provider that protects your customer relationships by offering responsible and respectful accounts receivable management that takes each unique situation into account.

Suppliers who understand that every credit relationship is different—meaning that no two cases or debtors are alike—can create customized collection strategies. The goal here is to meet the debtor on equal footing, taking into account their current social and economic circumstances.

At Collectia, we strive to understand debtors’ situations from their own perspective. This helps ensure they are treated with dignity and respect, while we work to make the collection process as stress-free as possible.

5. The Price

For many business owners, price is a decisive factor. The majority of debt collection agencies offer a “no cure, no pay” policy for the out-of-court debt collection process. This means that the debt collection agency will only receive payment for your case if it is resolved. Typically, a small commission is then charged based on the principal amount recovered.

Other providers offer a pricing model based on an annual subscription (service agreement). Unlike the “no cure, no pay” model, they often do not charge a commission on the principal amount recovered.

In a third pricing model, used by several debt collection agencies, a setup fee is charged for each case submitted.

That is why it is important to carefully review the cost of debt collection services. There are often many hidden costs and fees, which depend on the specific details of the case and how it proceeds. Debt collection agencies and debt collection attorneys often charge fees for initiating cases, referring cases to court, transferring cases to monitoring, and more.

6. Set requirements for your supplier

As a business owner, it is important that you actively set requirements for your business partner based on what is essential for your business.

Your requirements may range from communication methods and billing practices to more complex aspects such as the company’s ESG (Environmental, Social, and Governance) and CSR (Corporate Social Responsibility) policies.

At Collectia, we believe that a dedicated and professional debt collection partner should prioritize its clients’ needs and priorities. That is why it is crucial that you set clear expectations for your attorney or debt collection agency to ensure a partnership that reflects and respects your company’s values and objectives.

7. Get a demo of the system

Most debt collection attorneys and debt collection agencies offer an online system where you can create, track, and communicate about your cases. It’s a good idea to ask for a demonstration of this system.

A demo like this is essential for assessing how well and professionally the system’s online access works. The more user-friendly the system is, the faster and more efficiently you’ll be able to handle your debt collection cases.

If the system isn’t effective, you may end up having to handle a large portion of your communication via email or phone, which can be time-consuming and inefficient. That’s why it’s important to make sure the system meets your needs before you begin working with them.

Law firm or debt collection agency?

Many companies face the common dilemma of deciding whether to hire a debt collection attorney or a debt collection agency for their debt collection needs. At Collectia, we have previously published a detailed article that reviews the pros and cons of both options.

We recommend that you read this article to gain a deeper understanding and insight into what each type of provider can offer and how it aligns with your business’s specific needs and requirements. This knowledge will help you make a well-informed decision about the best debt collection partner for your business.