There's no set number of days an invoice needs to be overdue before involving a debt collection agency. The right time depends on the circumstances of the debt and what's happened since payment became due, but there are signs that chasing internally has reached its limits.
These are 5 signs an overdue account needs external recovery.
1. Payment reminders are no longer getting results
A single missed payment deadline isn't necessarily a reason to refer an account. If a customer has already been given several opportunities to pay and hasn't followed through, there's reason to question if more reminders will achieve a different result.
At this point, it's worth establishing if the customer is unable to pay and if the reason is temporary, or if they're simply unwilling and require further action.
2. An invoice has been outstanding for an extended period
The longer a debt goes unpaid, the harder it is to recover. If a customer's financial situation deteriorates, there's less money available to pay the balance.
An invoice that's been overdue for 90 days despite repeated attempts to collect it suggests the usual credit control process hasn't worked.
3. A customer has stopped responding
A customer who previously responded to payment reminders but has stopped communicating is a particular concern, especially where previous promises to pay haven't been kept.
Without a response, there's no way to discuss the overdue payment or agree when it will be paid. Where calls and emails continue to go unanswered, or existing contact details are no longer valid, further attempts using the same information are unlikely to get a response. Our Debtor Tracing service uses credit records and other available information to establish a customer’s current address, to re-establish contact and pursue payment.
4. A dispute is preventing payment
A dispute alone isn't a sign that an overdue account needs external recovery, they're a normal part of business and many are settled directly. A dispute becomes a reason to involve a debt collection agency when it's preventing payment and internal attempts to settle it have been unsuccessful.
At that point, an independent third party can assess both sides' positions, challenge disagreements that aren't supported by evidence and negotiate a settlement. The key consideration is if the dispute is still being addressed productively or has reached a standstill.
5. Internal collections are taking up too much time
Some accounts take more time to chase than others.
An account that requires continued follow-up without getting closer to payment, it's worth weighing up the time being spent against the likelihood of collecting it internally. Referring difficult accounts leaves more time to manage other outstanding payments while recovery continues.
