Debt Collection Case Study: Don’t Delay!

Posted by Marilyn Miller on February 05, 2015  /   Posted in Uncategorized

We’ve written before about how a lack of focus on aging accounts receivables or waiting too long to pursue bad debt can hurt a small business. Here is an real life example of opportunity lost, because our clients simply waited too long.

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Our client is a medium sized family home heating oil business. They had three customers who were over 90 days overdue on their bills. They had hired a collection agency, but decided to wait before sending the accounts to collections. The credit manager wanted to save the cost of using the collection agency, and just had his staff continue to call. They sent the delinquent customers bills every month but never heard back. 

After two years, the credit manager finally decided that it was time to send the files to the collection agency. Here is what happened:

  • The collection agency rate was significantly higher because older files require more research time and effort
  • The first delinquent customers had retired, sold his house and moved out of state. Other creditors had been paid out of the proceeds from the sale of his home, but there is now very little money left, and nothing to attach. 
  • The second customer has declared bankruptcy and his debt has been discharged. Client gets nothing!
  • The third customer passed away and his estate is in probate. The bill will likely get paid, but we have no option other than to wait for the estate to settle – probably another year at least.

We sat down with our client and determined with them what time period was reasonable for them to attempt in-house collection. They decided on 120 days from the last invoice or last payment. Then, we made it as easy as possible for them to submit accounts to their agency putting in place a standardized process to prepare collection accounts quickly and efficiently which included a collections checklist so they sent the right information to their collection agency to help get better results

Our client reports that their agency is really doing well for them, and the staff feels does not feel that the collection process is a burden. 

Want to boost your in-house collection efforts with a great collection letter? We can help!

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