The Importance of Timely Collections in Commercial and B2B Debt Recovery

Whether you are a business owner, accounts receivable manager, or simply the person responsible for recovering your company’s unpaid commercial debt, we’re guessing collecting aging receivables isn’t one of your favorite responsibilities. Pursuing unpaid debt is never a fun or easy task, which is why so many businesses put off this task, resulting in poor cash flow and an unhealthy bottom line. The reality is however; the task of collecting your delinquent commercial and business-to-business debt needs to be one of your top priorities.

But why is accounts receivable management such a time-sensitive task? Because when it comes to your odds of recovery, time really is money. As shown in the graph below, the collectability of delinquent commercial (B2B) debt decreases significantly the longer the account is outstanding.

 

As you can see, the probability of collection decreases at an exponential rate the longer you wait to pursue a delinquent account. So clearly, it is in your company’s best interest to take action on your unpaid commercial receivables as soon as possible. For this reason, we suggest designating a specific member of your staff and schedule a specific time during each week for following up on your aging accounts receivable.

TIP: After all collection calls, document the conversation you had with the business with a delinquent account. Record when the conversation took place, make note of whom you spoke with, and if a payment arrangement was agreed upon, outline the details and timeline for when the account will be settled in full. By having this information on record, you will have a much clearer picture of your business’ future cash flow and will have a better understanding of your accounts receivable as a whole.

But how long should you attempt to recover a commercial debt internally using your own collection staff? And when is it time to outsource your accounts receivable management to the professionals? Businesses typically pursue unpaid accounts using internal staff for approximately 90 to 120 days (when the odds of recovery are highest) before outsourcing an account for 3rd party collection. Then once a debt becomes over three or four months past due, it is common for businesses to send an account out to a professional commercial debt collection agency. Many collection agencies however encourage businesses to turn over their delinquent accounts sooner so as to maximize the odds of recovery.

So take a proactive approach to debt recovery and don’t wait too long before attempting to collect your unpaid commercial and business-to-business receivables. Whether you choose to pursue past due accounts internally or outsource your debt to a professional collection agency, just remember that time is of the essence. The longer you delay your collection efforts, the less likely it is your company will eventually be paid.

The information provided in this article does not constitute legal advice and is intended for educational purposes only. © 2015 Hunter Warfield, Inc. All Rights Reserved.

 

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