When to place your past due accounts with an outside collection agency?

Uncollected dollars nibble away at your company’s cash flow and profitability. Over time, they can threaten its growth and sustainability as well. The solution is to adopt a proactive approach to dealing with past due accounts.

A survey by the Commercial Collection Agency Association (CCAA) revealed that, after three months, the probability of fully collecting on a delinquent commercial (B2B) account dropped dramatically with the length of delinquency.

At just 90 days past due, the likelihood of a full collection drops to 73%. After 6 months, it drops to 50%. After 1 year, 25%. And after 2 years, it’s a meager 10.5%.

Why this dramatic drop? There could be a number of reasons, but the most common is that the creditor waited too long before placing the account with a professional collection agency.

When an account reaches 90 days past due — often sooner, depending upon the amount of internal collection effort– the creditor has lost leverage and it’s time for third-party intervention.

By the time an account is 90 days delinquent, if the debtor actually intends to pay, you should at least have in hand an agreed on a repayment schedule. If you don’t, waiting any longer is a mistake. It increases the likelihood that the debtor will go out of business, file bankruptcy, or disappear.

So, how do you decide when it’s time to place the account with a collection agency?

Based on the CCAA’s survey, placement should occur no later than 90 days past due. 

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