Covering Business Credit Logo Home   About Us   Services   Credit Articles   Q&A   Contact  

  Business Collection Tips  

When to Place an Account for Collection
By Michael C. Dennis, MBA, CBF

Business Collection Tips
All Articles •  Home

Collection agencies do a great job of describing why trade creditors should entrust your delinquent and uncooperative accounts to them. There do not seem to be any universally applied rules about when and why to place an account for collection.

There are no hard and fast rules about when to turn an account over to a collection agency. However, Credit Managers should seriously consider doing so when the following conditions exist alone, or in combination:

  • A customer has bounced checks to you or other vendors,

  • The customer refuses to replace the bounced check,

  • The creditor is no longer making progress toward clearing the unpaid balance,

  • If the customer will not take your calls

  • The customer will not return your calls,

  • The account is 90 days or more past due

  • Federal or state tax liens have recently been placed on the debtor company,

  • There is significant employee turnover in the company, especially among senior employees,

  • The customer has broken two or more commitments to pay the past due balance,

  • The customer promises to pay one amount, but pays significantly less,

  • The debtor refuses to acknowledge the balance due in writing,

  • The customer proposes a payment plan, but refuses to sign a Promissory Note

  • The debtor is considering filing for bankruptcy protection,

  • The customer is changing banks,

  • The debtor is in violation of its bank loan covenants,

  • The delinquent customer cannot pay until arrangements with a new bank are settled,

  • The bank has frozen the customer's account,

  • The debtor issues a check placed on a closed,

  • The company was recently sold,

  • There was a bulk sale of assets,

  • The customer has proposed a payment plan to trade creditors as an alternative to a bankruptcy filing,

  • A customer asks you to speak with their "work-out" specialist,

  • When you threaten to place the customer for collection, and they seem unconcerned,

  • The customer's phone is disconnected,

  • Your mail is returned,

  • When there has been an ownership change,

  • The new owner claims not to be responsible for the debts of the former owner(s),

  • If you cannot reach a decision maker,

  • You cannot get a reasonable commitment for payment from the decision maker,

  • You learn the customer is being sued by other trade creditors,

  • The account has been placed for collection by other trade creditors

  • The business is for sale,

  • If you are told the business is for sale,

  • You are offered payment only after the sale is completed,

  • Creditors that once sold the customer on open-account terms now sell on COD terms,

  • There is significant deterioration in payments to creditors,

  • The debtor company does not respond to a final demand for payment.

The more of these facts apply, the more likely that it is time to place the customer for collection. Any unnecessary delay in placing an account for collection can reduce the likelihood of recovery.

Share |

Business Credit Articles
Send to a Friend
Ask A Credit Question
Questions & Answers
Business Credit News
Your Privacy
Site Map