How do I decide whether to send an account to a collection agency?

Deciding to send an account to collections is a tricky business because the longer you wait the less likely you will get anything and the longer the account has been delinquent decreases the amount you will collect. But you also don't want to have the bad feelings from your customers about sending them to a second party for collection proceedings that can be damaging to your relationship with them. So there is a fine line between jumping to fast to sending them to collections and waiting to long and getting less payment for the debt owed.

Some things to consider when debating whether to send an account to collections is:
- How long has the account been delinquent?
- Is the customer likely to return to your business if you send them to collections?
- Are you getting responses to your collection letters and phone calls?
- Is the person following through with any payment arrangements?
- Is the customer denying the account balance or refusing to pay?
- Has the customers address and phone number changed?

These are some great questions to help you determine whether your customer will eventually pay you and you don't need to take it to the next level or if you must get on with sending them to a collection agency.

You could send an account to an agency after only 30 days late or wait for a whole year it mostly depends on your needs and the cost verses potential return. If you have a relatively small account it may not be worth it to pay an agency to only get 50% of the money back. Usually if the amount is less than $20 it would not be worth it to send it to collections unless you have several accounts just like it then the bulk. If you wait a whole year the most you recover on average is about 30%. If your account is only worth $20 that is about $6 which you will be sharing with the agency, giving you very little incentive to send it to collections except the desire to receive something for your product or service.

How you decide to send an account to collections really depends on your needs and the best way to get your money from your debtors. You should have a system in place within your business that already handles delinquent accounts and have a plan for what your business standard is when some one doesn't pay within a certain amount of time. It should be standard for all accounts so there is no possible way certain customers could feel singled out or harassed. You should have a company policy that states when you go to collections across the board and is a standard for all accounts. This will also cut down on your decision making for each account make your decision whether it is a 30-60- or 90 day policy. Make your standard well known to all who handle your accounts and have a standard system to send the accounts to the agency.

It is important that you come up with a delinquency policy for your business so you don't waste time and money on deciding when to send your accounts to collections as well as for the protection of having a standard so no customers can accuse you of singling them out. The best plan is to send them to collections within a prescribed period of time realizing that the longer you wait the less money you will receive. Usually 1 year is the longest you should wait because the amount collected becomes almost nothing after that.