Are you owed money by an individual or another business? As a small business owner, few things are as disheartening as chasing up unpaid invoices. The unanswered calls. The lies. The constant checking of your bank account. You have better things to do with your time, but simply put, you probably need the money.

This is where a debt collection agency may be able to help. This is a business that, for a fee (sometimes on a no-win no-fee basis), will work to retrieve the money you are owed. But how do you choose the agency that is right for you?

In this article, Quality Company Formations – the UK's premier company formation agent and small business experts – look at choosing the debt collection agency that's right for your business. Let's get started.

Make sure this is the right path for you

Whilst it can be hard not to take it personally, it's important to know that you and your business are not alone when it comes to being owed money. Recent reports indicate that the UK's small business population are currently waiting on £7.4 billion in unpaid invoices. An astounding figure.

Some businesses will write the money they're owed off, and others will continue to pursue it. How your business chooses to deal with this is of course, up to you. Before you make this decision, consider the amount you are owed, how significant this is to you, and how far gone your relationship with the client is.

If the figure is noteworthy and the relationship is irreparable, it sounds like a debt collection agency is in order. However, if you think you have a chance at collecting the sum without involving another party and ultimately ending your business association, we recommend giving it one last try.

Only work with agencies that are Financial Conduct Authority (FCA) regulated

If an agency is regulated by the FCA (who regulate the UK's financial services industry), you have certain guarantees that the business will act appropriately and ethically.

Being FCA-regulated is not compulsory for debt collection agencies unless they work with financial services such as banks and insurance providers. This means, if a debt collection agency is regulated, you can generally be confident that they will remain professional throughout the process.

What's more, if the service provided by the agency isn't to your liking, ample facilities are in place to take any grievances to the next level.

How much does the service cost?

Debt collection agencies take payment in several ways. As mentioned, some will operate on a no-win no no-fee basis and then take a percentage of what is retrieved. Others will simply charge a fixed fee.

You need to find a service that charges a sum that is appropriate for the level of debt that you are chasing in a format that is agreeable to you. For example, if you've enlisted the services of an agency as a bit of a 'punt' to chase a debt you've all but given up on – paying an upfront fee probably isn't in your best interest.

Scour the reviews

Typically, debt collector sites are review and testimonial rich. This is no doubt a good sign but you also need to look away from feedback that the agency curates itself

Check up on their Google Reviews. See if they're set up on TrustPilot or Feefo. And don't forget to look at their social media profiles, being sure to check on specific feedback from clients, and how individual queries are handled.

Do they have experience in your industry?

Some agencies will specialise in pursuing payments for (and from) large businesses, others will work with smaller businesses, and some will focus on individuals. You need to find a collector who has experience within your industry and client demographic.

Agency websites should indicate their area of expertise but if this isn't immediately obvious, send the agency a quick email asking for their advice in dealing with your problem. If their reply indicates industry knowledge, take it further. If it's somewhat lacking, look elsewhere.

Are you happy with their processes?

You need to ensure that the method that the agency uses to demand and collect money sits well with you. Are you happy for the agent to conduct door visits or would you prefer the chasing to be done via the phone or mail?

This again goes back to how you currently see your relationship with the client. If it is truly over, more robust methods could be considered. However, if you are clinging on to a potential happy reunion, perhaps a softer approach is in order.

There's no right or wrong answer here. You just need to make sure you know exactly what you're paying for and are fully comfortable with this.

Talk to the agency

Finally, if you haven't already done so, we recommend talking to a representative at the agency before you commit to anything. Use this call as an opportunity to address any concerns that you have, iron out areas that you are unclear about, and get a feel for the business itself.

The agency you hire will be seen as an extension of your own business. It's naive to think that they're going to be anything other than professional but, you need to be certain that they represent the right solution for you and your business. A quick call can help you achieve this.

So, there you have it

That was how to choose a debt collection agency that's right for your small business. Chasing up what you are owed is never pleasant, however – with the right agency behind you, you will be able to retrieve some money whilst also maintaining your own business's good name. We hope you have found this article useful. Thanks for reading.