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When to assign your accounts to a collections agency

When to assign your accounts to a collections agency

Many executives have asked the question: “When should I assign my past due accounts to a collections agency?” We must be very aware of the direct relationship that exists between past due time frames and their recovery probability;  the longer the account is past due, the less probability of recovering your money.

According to the US Chamber of Commerce figures, your company has a 77% to recover an account after three months of having generated an invoice, 45% after twelve months, and 23% after two years.

Considering this, your account must be assigned to a collections agency once it becomes 90 days past due (60 days after the invoice date). This is when your client has received your invoices, account statements, internal collection communications and several phone calls. Your company took established internal collection steps and your client did not remit payment. This only shows a lack of interest on their part to resolve this debt or lack of funds. Whichever the reason, you have a collections problem and your account should be assigned to a collections professional without delay.

However, there are occasions in which an account should be assigned to a collections agency even sooner:

– Two or more failed promises to pay.

– Your client’s phone numbers have been disconnected. Request your sales team updates the contact information, but if you are unable to obtain new contact information, immediately assign your account to a collections agency.

– Your client requests documentation repeatedly and it has been previously sent. This is common practice to delay payment. Particularly, in the transport industry, a client requests the proof of delivery over and over again just to delay payment knowing that transport agents or carriers will only keep supporting documentation digitally for one year; in many instances, this documentation will not be available after that year.

– Dispute on the sales terms. For example, your client informs you they pay at 90 days not honoring the 30 days term stated in your invoice. You must reply immediately by confirming your  agreed sales terms at the time of granting credit, and require immediate payment. If they refuse to fulfill their obligation, you must assign this account to a collections agency.

-Your client informs you they will not be able to pay you within the agreed terms and refuses to give you a payment date or a realistic payment plan. This is an indicator showing there might be serious cash flow issues. Therefore, your company must take the necessary steps to look after their own interests, one of this steps is assigning this account to a collections agency.

– Your client suddenly tells you there is a dispute on the service provided, or that there is damage to the merchandise after a long time has passed. It must be clear there was no claim made at the time of receiving the merchandise, or at the time of receiving your invoices. If this claim is not well supported so as to allow you to research the claim, assign this account as soon as possible. Otherwise, this case will just turn older and more complicated to resolve.

I invite you assign your accounts taking into consideration these suggestions mentioned above. I have witnessed along many years of my career in the collections industry, many companies assign their past due accounts when it is too late, having wasted not only time, money and effort, but also the probability of recovering their money.


Sal Banuelos

Is internationally known for the debt collection results he has provided to the freight transportation and import/export industries worldwide for the last 15 years. Author of "Credit and Collections in the Freight Industry Handbook" & "Credit & Collections Policy – Practical Guide”

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