When to Hire a Collection Agency

Past Due

It’s difficult to know when to send a past-due account to a collection agency. Businesses often delay sending accounts to collections out of a fear that it means the end of the customer relationship or a concern that it will be too expensive. If your business is too small to have staff dedicated to credit management and in-house collecting, try hiring a collection agency. It does not make sense to direct a large amount of your small workforce toward making collection calls. Even if you have a highly trained staff, there comes a time when a delinquent customer won’t pay unless you take action.

Collections Can Help Relationships

When people think of collections, they often picture a sloppy guy with a cigar harassing and threatening their customers. In reality, many collection agents are trained business professionals who are less likely to insult or harass your clients than an emotional person on your staff. We’ve handled many accounts where the first step was to undue damage our client had done trying to collect. A collection agency can help solve the issue quickly and professionally, allowing you and your client to continue working together.

Collections Saves Money

The longer a bill goes unpaid, it is unlikely you will collect. Once an invoice is 90 days past due, using in-house staff to collect is probably a waste of their time. Instead, they should service paying customers. A collection agency can increase the pressure and solve the problem before your customers financial woes get worse. Every week we receive claims that are one- or two-years-old. Most are too late to recover money because the company is out of business. Since reputable collections agencies only get paid when they collect, there is no upfront cost. Collection agencies that specialize in business collections and dispute resolution typically negotiate better settlements and payment plans then an in-house collector. It’s what they do all the time. You can end up financially ahead by promptly turning delinquent accounts over to collections sooner than later.

Avoiding Collections

If you want to limit the need to send accounts to collections, here are strategies to consider. First, make sure you have clear payment terms. Make it as easy for clients to pay as possible. The more ways a client can pay (cash, check, credit card, online, ACH, Wire PayPal, etc.), the better. You want to keep in regular communication with clients, especially when they are delayed with their payment. Send a politely worded note the day a bill is late. Sending late notices will help you sort out clients who cannot pay due to issues such as an owner being out of town or a lost invoice from those with serious cash flow problems or who do not plan to pay. Working with a collection agency regularly helps you avoid future collections issues and earn more money over time. A knowledgeable collection agent helps you develop credit applications and contract terms that will make it easier for you to collect on invoices.

Setting a Policy

As a general rule, we recommend sending an account to collections when it is 90 days overdue. Once an account is more than 90 days past its due date, it becomes more challenging to collect on it. If you have reason to believe that a client is in serious trouble, or is about to ghost you, then you should send the account to collections as soon as it is overdue. Having a policy, such as “all accounts are sent to collections after 90 days” allows you to remove emotions from the situation and explain your decision to your customer. This policy also allows you to move quickly. Once an account needs to go to collections, you don’t want to waste precious time.

Moving Forward

Sending an overdue account to collections is often the best and easiest way to get the most money out of the situation. Researching how collection agency work, and which ones are the best for your field and area can help you choose one before you need it.


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