Most businesses deal in credit, which means that at one time or another they will need the services of accounts receivables collection companies. Extending credit is a way of life for businesses these days, but the unfortunate reality is that some of those open accounts receivables will not be paid by the due date. What then?  

Truthfully, most problems with delinquent accounts could have been prevented altogether by making sure that the credit policy is clearly spelled out in contract ahead of time. A detailed credit policy should include specific information about what will happen if accounts are not paid on time.   

But there are some occasions when no matter what you do, an account will still remain delinquent. At that time, a business needs to decide how to proceed. Most accounts receivables collection companies will send out a pre-collect notice, which informs the client that they are monitoring the account and will be taking over the account if it isn’t paid. Some accounts receivables collection companies charge a small fee for this and others will do it for free, on the expectation that a business will use its full services if the client still doesn’t pay.   

Accounts receivables collection companies are legally considered third party-collectors. As such, they have to abide by certain rules set out in the Fair Debt Collection Practices Act (FDCPA). When you decide to sell an account to a accounts receivables collection company, they take over and the debtor makes payment to them. The collection company may charge in a few different ways. Some charge fees up front, but the smarter option is to choose a collection company that charges on a contingency basis. If they receive payment on the account, they will give you a certain percentage and keep the rest for themselves. Because it involves your profits, you’ll want to check on the collection company’s standing with the Better Business Bureau and hire a local agency rather than an out-of-state one.   

After you sell an account to a collection company, you have pretty much washed your hands of the entire affair. The accounts receivables collection company takes over from that point and tries to extract payment from the client. Whether they choose to take debtors to court or pursue other action is really up to them. If you have sent out a bill, invoices or overdue notices at 30, 60, and 90 days, tried to contact your client by phone or email, and still have not gotten a response within 120 days, you should start thinking about accounts receivables collection companies.