When Should You Send an Account to Collections?

Collecting from Clients
Without Jeopardizing Relations

Risk comes from not knowing what you are doing.”– Warren Buffet

There’s a delicate balance between sustaining professional relationships and protecting your business. Every company struggles with this balance, especially when navigating B2B debt collection. But within this struggle, one question remains: When is the best time to send an account to collections?

Here are five easy tips to assist in your business relations:

#1. Assess the Situation

Before moving toward collections, take a step back and assess the situation thoroughly. Ask yourself these simple questions:

Is this a first-time occurrence, or have there been repeated instances of non-payment?
Is there a genuine dispute that needs resolution, or is the client simply avoiding their financial obligations?

#2. Begin Communicating

Communication remains one of the most critical factors in fostering a strong business relationship. If you are working with a client who appears to have payment issues, you must engage with them as early as possible.

Approach them with courtesy and respect while trying to understand their delay. In almost all cases, a simple conversation will bring misunderstanding to light and create a pathway to resolution.

#3. Set Clear Expectations

When it comes to debt collection, clarity is key. Communicate your expectations regarding payment deadlines and consequences for non-compliance. By setting these boundaries upfront, you establish a framework that guides your interactions.

#4. Document Everything

Documentation is your ally in every aspect of your business. Keep records of all debtor communications and interactions regarding their outstanding debt. These records could serve as valuable evidence if legal action becomes necessary.

#5. Know When to Act

When is the right time to escalate the matter to collections? There is no one-size-fits-all answer; however, here are three warning signs to look for:

Repeated Non-Payment. If a client consistently fails to meet payment deadlines despite repeated reminders and discussions, it may be time to take more decisive action.
Lack of Communication. If the client becomes distant or evasive when discussing payment issues, it could be a red flag signaling deeper problems.
Financial Inconsistency. Monitor your clients’ financial records. If a client is facing financial difficulties that prevent them from meeting their obligations, it may be necessary to explore other options, such as payment plans or settlements.

In a Nutshell

Timing is critical within B2B debt collection, and understanding when to initiate collections action requires careful consideration of the circumstances. Studies by ACA International indicate that the odds of collecting an overdue account decrease by 50% at 180 days past due:

Maintaining open communication, setting clear expectations, and documenting your interactions will enable you to act with confidence. Remember, it’s not only about saving your business financially – it’s about preserving your professional reputation and fostering positive relationships within your industry.

Sources:
Featured Image: Adobe, License Granted
ACA International