An unpaid invoice doesn’t have to become a write-off.
Knowing how to send a debt to collections the right way protects your cash flow and your business relationships. Follow these five steps.
Five Steps to Send a Debt to Collections
- Give the customer a fair chance to pay first. Most businesses wait 30 to 90 days past the due date before escalating to collections. This grace period gives the customer room to resolve an honest oversight without damaging the relationship.
- Send a formal demand letter. Before involving a collection agency, send a written demand letter that clearly states the amount owed, the original due date, and any late fees or interest that have accrued. Include a deadline for payment and let the customer know the account will move to collections if it isn’t resolved.
- Choose the right collection agency. Once the deadline passes without payment, it’s time to bring in a collection agency. Look for one with a strong reputation, industry experience, and a compliant, respectful approach — the wrong agency can do more harm than good to your business’s reputation.
- Provide the agency with accurate account information. A collection agency can only work as fast as the information you give it. Be ready to share the debtor’s name and contact information, the amount owed and original due date, any late fees or interest, and a copy of the demand letter you sent. Reputable agencies, like New World Collections, have secure, compliant processes for gathering any additional information they need to locate and verify a debtor — you don’t need to collect sensitive data like Social Security numbers yourself.
- Stay informed as the process moves forward. Once the account is in collections, check in regularly for status updates, and make sure your agency operates in compliance with the Fair Debt Collection Practices Act (FDCPA) — this protects your business from liability along the way.
Don’t let past-due accounts drain your time and resources. Contact New World Collections today to learn how we can put your outstanding accounts on the fast track to recovery.
