The best time to assign an account to a collection agency is when the debt is around 90 days past due.
Why 90 days?
- You have given your debtor at least three billing cycles to pay the bill and resolve any billing disputes that may have occurred.
- At 90 days, your efforts have been exhausted, and the account is clearly in the default territory. Your staff is spending more time and energy on reminding newer accounts that are around 30-60 days past due.
- Paying your bill is clearly not a priority in your debtor’s mind by now. ( or your patient’s mind, in case of medical debts). Chances of recovering money are dropping every day. A collection agency typically recovers 75% of your money when the account is assigned at 90 days.
- Your internal staff is no match for a professional debt collector’s persistence and collection tactics. Your accounting department is unaware of collection laws that constantly change.
- You can write off collection costs as business expenses in your taxes.
- Quite likely your debtor likely has several other unpaid bills. A debt collector ensures that your bill becomes their top priority. You want to get paid before he wracks up more unpaid bills.
- Assigning an account at 90 days to a collection agency will likely not alienate the debtor. He understands that you have given them enough time already.
- Your collection costs are lower: You still have enough time to send Fixed-fee collection letters that cost a lot less than Contingency-based services. By spending about $15-$20 per account, you have an excellent chance to recover your money. Collection demands sent by a professional debt collector are a huge concern for your debtor versus when trying to collect by yourself. They will dig in all resources to get a collection agency off their back.
It is better to recover 75% of your money rather than take a 100% loss.
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