When should we send an account for collection?

We get this is a question a lot. Every company must balance the likelihood of collection internally vs reduced profits of sending the account to a third party collection agency. You don't want to send it too early, because you'd rather get the entire amount and you should be able to collect it yourself. However, you don't want to wait too long, as the chance of collection, even with an outside agency, diminishes over time. Sometimes by a lot. The balance is not just full invoice vs reduced profit. You have to factor in the third scenario: no collection at all.

The Commercial Collection Agency Association of the Commercial Law League of America published a study in 2004 (before the recent crash - it's probably worse now) on the Collectability of Delinquent Commercial Debts At Time Intervals After The Due Date. If you wait six months, the chances of collection are only about 50%. A year: around 20%.

We always suggest that you submit accounts when they hit 90-120 days form invoice date. Most of our clients shoot for this. In some cases, even sooner (disputes, reports of debtor financial problems, etc.). If you wait much longer, you severely reduce the likelihood of collection. Can your company afford to wait?