You wait patiently for that payment to come. Assuming that if you give it time, your client will pay up – finally.
Unfortunately the longer you wait, the less chance you have of ever seeing that money.
According to the Commercial Collection Agency Association, “the probability of full collection on a delinquent account drops dramatically with the length of delinquency.” (Get Collection Trends PDF here)
In fact, after 3 months, you're likely to collect only 70% of the amount owed. After 6 months, that percentage drops down to just 50%. And after 12 months, you’ll be lucky to collect just 23% of your balance owed.
So what can you do?
One option is to hire a commercial collection agency. But you want to make sure that's the right option. It may be time for you to seek out a commercial collection agency to help you with your unpaid invoices if:
You have a first-time customer who hasn’t responded to your first invoice – and it’s been awhile since you were in touch.
You agreed on a payment plan, but they haven't followed through.
Your customer denies any agreement to pay.
They start making unfounded claims about you, most likely in an effort to avoid paying.
You find out the customer has a previous history of not paying debts.
Once you've determined you need professional help with your collections, you want to pick an agency that’s right for you. Someone who has a proven track record helping businesses like yours.
Here are some questions to ask a potential company to help you make your decision:
Are you certified by the CLLA?
Only agencies that have passed rigorous test requirements have the honor of being certified by the Commercial Law League of America. Among many other requirements, they must adhere to the Fair Debt Collection Practices Act which prohibits collection agencies from using any unfair or abusive practices to collect debts.
Going with someone certified ensures you're partnering with a legitimate business with a proven success following the right methods.
Are you licensed to work in the state my debt is located?
In most states, debt collection companies must be licensed in the state the debt is located. If you have debts in multiple states, make sure you find an agency that is licensed to do business there.
Do you have experience in my industry?
While you want an agency that knows their way around collecting debts, it’s also good to have someone who knows a bit about your industry and its intricacies. This knowledge will give them an advantage, and could increase the chances of getting your money back.
How will you keep me in the loop during the process?
Having someone deal with your finances can be nerve-wracking, especially if you’re not quite sure what’s going on. To make sure you can trust any potential agencies, ask them about their processes.
How often will they communicate with you? What methods will they use to reach out? Will you be able to get in touch with them if have a question?
If you have payments that are past due and there doesn’t seem to be any indication that the customer will pay up, it may be time to seek outside help. Consider whether it’s time to work with a commercial collection agency, and ask the questions that will help you find a company that is the perfect fit for you and your business.