You’ve done everything you can to get that customer to pay: phone calls, letters, offers to accept partial payment. And still nothing. It may well be time to turn this problem account over to a collection agency.

Good collectors don’t use the brash, strong-arm methods often portrayed in movies. They are professionals who use their vast knowledge of collection techniques and compliance issues to help clients resolve payment issues. Collectors must comply with the Fair Debt Collections Practices Act (FDCPA), which sets boundaries for tactics and methods. And because they’re experts, collectors have a better chance of success, saving you time and effort in the process.

Collection Agency Research (CollectionAgencyResearch. com), a leading resource on debt collection companies, can connect you with qualified collection agencies in your area. To determine which one to hire, consider these factors:

Overall success rate. This is actually more important than the amount of money an agency collects. If a collection agency retrieves a greater percentage of total past-due accounts, it will mean more money for your business. That may require a higher fee, of course, but you will receive more money over time versus a less successful agency with lower fees.

Industry focus. You want an agent that specializes in businesses like yours. Because they understand how to work with that industry, they may have a higher success rate pursuing those types of debts.

Two-way communication. The exchange of key information is important before, during and after the collection process. Find out how detailed their reporting is for the collections results, how you receive payment upon collection, and other information you have to make their job easier.

Trial and error. When you meet with several collection agencies, give each of them a few delinquent accounts and see how they perform. Judge them based on how they work with clients, the amount collected, and how quickly they remit payment. You can then select the best service.

Observation. See how they conduct business. Ask to view a sample collection letter to see what they send to clients. If the agency’s offices are nearby, arrange to visit them in person and sit in on a few collection calls to learn firsthand how they do business.

License and bonding. Make sure every business collection agency under consideration is officially licensed and bonded by the state they work in, and carry Errors and Omissions Liability insurance.

Factoring as an alternative

A factor is a financial intermediary that purchases your receivables. It is an expensive form of financing that focuses more on the invoiced party’s creditworthiness than on yours. The factor agrees to pay you most of the invoiced amount within 24 to 48 hours, and the balance less commission and fees upon receipt of the amount due from the invoiced party.

The factoring company’s fees are based on the creditworthiness of the invoiced parties, the value of the invoices being factored, and the number of invoices processed.

Although factoring is a relatively expensive form of financing, factors provide a valuable service to companies that operate in industries where it takes a long time to convert receivables to cash, and to companies that are growing rapidly and need cash to take advantage of business opportunities.

Susan Holmes is a SCORE volunteer mentor. To learn more about collections, credit policies and other small business matters, contact SCORE is a nonprofit organization whose volunteers provide free, confidential business mentoring and training workshops to small business owners.