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When to Place Accounts for Collection


Creditors often ask, "When should I place an account with a collection agency?"

Generally, if an account is 120 days delinquent (ninety days after the invoice date), a creditor should initiate placement with their collection agency, particularly if no response has been received from the customer. At that point, most creditors have sent out several statements and collection letters and made several collection calls. They have tried to bring to the customerís attention the delinquency and their concern about it. The customerís lack of response to collection calls and letters indicate either a lack of concern or a cash flow problem. In either case, a collection problem exists, and the account should be placed with a licensed and bonded collection agency.

There may be times however, when a creditor should placed an account earlier with a collection agency. The following provides a guideline to such events:

Two or more broken promises of payment. Payments were promised, but no checks have been received, and customers will not send immediate payment by overnight delivery.

Customerís telephone is disconnected. Double check with the information operator, and if no new listing can be obtained, place the account immediately.

The customer repeatedly requests documentation even though they have been supplied the documentation previously. This common practice is used to delay payment of the account.

Your customer indicates that they do not adhere to your terms of sale. For example, they may indicate that they pay bills in sixty or ninety days and not according to the agreed upon terms of sale. If you did not have an agreement with the customer before shipment for extended terms, this is just a delaying tactic. Explain to your customer your terms of sale and request immediate payment. If they refuse or fail to send a check as promised, place the account with a licensed and bonded collection agency.

Your customer indicates an inability to pay and refuses to provide a specific date for payment or to initiate a realistic payment schedule. This is a sure indication of a serious cash flow problem and immediate steps should be taken to protect your interest.

Your customer states they will "take care of the account" but refuses to make a realistic commitment for payment or to work out a payment schedule. This is another indication of a serious cash flow problem.

Your customer suddenly indicates, in response to your request for payment, a dispute regarding the merchandise shipped or your terms of sale. Such a dispute was not raised previously. If your investigation shows the dispute groundless and the customer will not take the steps to make payment or resolved the matter, the account should be placed with a licensed and bonded collection agency.


 
 
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