A collection agency partners with your business to recover money owed to you. Much of the time, they are working on your files without being paid first. Their time and effort on your files is their investment in you and your business.  The more you assist and communicate with your agency, the greater your chances of success.

One of the best ways to improve your collection agency results is to make certain you are not holding onto your accounts too long.

It seems counter-intuitive, I know, because you should attempt to recover on your own. The trick is not waiting too long to send file to your collection agency. If you wait too long, you may be sabotaging your ability to get paid.

How long is too long?

Only you can decide when it is time to hire a collection agency. However, if you have gone 90 days with no payment and no contact, there is no reason to delay.

What happens when you wait too long?

Too much delay is like gambling with your accounts receivables. Here are some issues that can develop:

1.  The delinquent customer could move out of state. This would not make it impossible to collect but it will likely make it more difficult.

2. The delinquent customer could sell an asset that you might have been able to attach for payment later on.

3. A business customer could go out of business.

4. Your customer could incur more debt, be less able to pay you, or even declare bankruptcy.

5. Other more proactive creditor could take legal action and place liens on their property, wages, etc. You would then be behind those.

6. You could incur a higher contingency collection fee. Higher fees for older accounts (over a year, or in some cases, over 180 days) are common, because older debts are more difficult to collect.

I just received a dozen accounts from a client, a contractor who told me six months ago he wanted to send the files to me. At the time, the files were already 60 days late, and the customers were ignoring him. He wanted to wait because he did not want to “pay our fee.” So, now after nearly a year, we are working on the files. The first file, a small for a small business, is not collectible because the business is gone. It was collectible six months ago, but not now. So, to save a small fee, the client now has nothing to show for it. Something is better than nothing, remember that. Do not be penny wise and pound foolish. 

It is smart to jump on your accounts receivable, take immediate action once they begin to age and keep consistently monitoring. It is not smart to do nothing, either because you are not giving your accounts receivable the attention they deserve, or if you are hoping that delinquent customers are magically going to pay you.