In the domain of Accounts receivable (A/R), an older account has fewer odds of being paid. Holding onto accounts that you won’t be able to collect using the methods employed by your business can be quite costly. When concentrating on other aspects of your business proves to be a better use of company time and resources, employing an outside collection agency (OCA) to collect an overdue debt is a fantastic choice that may truly help your business flourish.

 

Read more: Best Practices to Prevent Invoice Scams

 

Collection specialists are trained on the newest technology, legal issues, and collection techniques at certified commercial collection agencies. They frequently understand business and collect laws and regulations as well. Therefore, using a third-party collection agency will help you save time and almost certainly produce considerably better results than working on your own.

 

The Commercial Collection Agencies of America report that in as little as three months, the likelihood of recovering a past-due account drops to 68.9%. 

 

Collectability drops to 51.3% after six months, and there is only a 21.4% likelihood of ever getting paid for past-due accounts after a year. If your business is holding on to unpaid invoices without trying to collect on them, it would be wise to turn them over to an experienced commercial collection agency. Holding onto the bills will prevent payment, making the percentage you’ll pay the agency more than worthwhile 

 

The key reasons why an outside collection agency might be a good option compared to your in house executives.

• Management and credit staff are forced to spend time on past-due accounts when they should be working on more lucrative projects.
• According to internal collection statistics, about 27% of delinquent debts will never be collected at three months past due. Over 44% of outstanding debts will not be collected at six months past due.
• When the cost of your own personnel’s efforts does not justify additional action or a client exhibits bad faith and loses credibility, past-due receivables require fast and effective action.
• A licensed collection agency will guarantee the greatest caliber of expert collection services, competitive outcomes, and moral interactions with you and your clients.

 

What Next?

Please avoid engaging in talks or negotiations with the customer once you have sent your claim to an outside collection agency. Simply direct the client back to your agency if they get in touch with you. Sometimes, in an effort to muddle or delay payments, clients try to get around experienced collectors. This trick won’t work, so beware. All communications and negotiations should be conducted through the collection agency who has been assigned a claim.

 

To keep the collection process moving along, be sure to respond quickly if the collector requests more information. The longer you wait, the slower we’ll be able to collect from your account. It may also make it impossible for your collection agency to collect your account at all.

 

If you have decided to use a collection agency after performing your homework, give the agency ample time to work the accounts you have placed. The earliest feasible settlement of the accounts is in the best interest of the collecting agency. Also, avoid Micromanagement as it is likely to hinder the collector from processing the account properly.

 

A collection agency’s primary goal is to pay out claims as quickly as possible. Therefore, when a claim is established, a letter alerting the customer that their account has been given to collections, along with the precise amount owing and orders to transmit payment immediately, is often delivered. Typically, you can anticipate hearing from us to offer an account update within two weeks. You may have online access to your account if your preferred OCA allows it. Full payment, payment obligations, or a payment schedule should be established within 30 to 45 days.

 

However, with your consent, the account may be transferred to an attorney if the agency is unable to collect on it within the 30-45 day window.

 

The first time an attorney and a client connect is referred to as attorney-friendly handling. There has been another attempt to settle the issue without resorting to legal action. If payment is not paid as a result, the agency may ask for your permission before filing a case. After 60 days, customers are routinely served with complaints, and they have 20 to 45 days to react. 

 

 

However, if the client doesn’t respond, the attorney will ask the court for a default judgment, which will take another 30 to 60 days to process. If the customer responds, the next course of action and timing will be determined by his position.

 

After the verdict has been reached, the client has 30 days to make payment. If the client still doesn’t pay, the attorney will issue an execution to the sheriff, who then has 90 days to contact the debtor and arrange a payment plan. In the event that no payment is made as a result, further legal action will be required.

Conclusion 

Any organisation, regardless of size, needs a positive cash flow to succeed. The financial state of your company can suffer if there are even a few past-due accounts. Therefore, if you lack the time or resources to carry out collecting activities internally, it is advisable to deal with an outside collection company. The best plan of action for an external collection agency is to generate due payments as quickly and as much as one can. After all, they won’t get paid if they don’t collect.