A question often arises in our offices,”When should I stop my efforts collecting past due accounts?”
Unlike fine wines or select cheeses, past due accounts do not get better with age. Most businesses make the mistake of waiting twice as long as they should before handing over their accounts receivables to a commercial collections agency. For instance, did you know your chances of collecting past due accounts in-house drop 12% every 30 days
When it comes to collecting past due accounts, it͛s important for business owners to remember, collecting on outstanding receivables is a financial process. Because we have an invested interest in our companies, we tend to treat collection as an ͞emotional͟ process instead of a financial one. Whether or not we make or lose money needs to be the determining factor when pursuing collecting past due accounts.
For example, Collecting on an invoice that is less than 120 days old holds an 80% success rate while dropping to 40% collectible after that time frame. Because we still see the debt as outstanding, we mistakingly apply the same amount of time and effort trying to collect those older accounts as we do the new ones. Our motto: Don͛t spend a dollar chasing after a dime.
Early warning signs it may be time to stop your collecting past due accounts efforts
Customer avoids contact attempts
Refuses to sign personal guarantee
Customer breaks terms of original agreement
Customer breaks their first promise
Customer only makes partial payments to buy more time.
Customer ignores demand letters
You have business to run. You have better things to do than spending your valuable time Collecting past due accounts. Handing your outstanding debts and accounts receivables over to a commercial collection agency is often your best course of action.