Most businesses are pretty good at knowing when an invoice is overdue.
But they’re often less confident about what happens next.
Say an AR person sends a reminder. Then another. Someone calls, and the customer promises payment next week.
Next week slides into next month, and the account stays exactly where it started: unpaid, consuming time and getting older.
Until FINALLY somebody asks the question that really should have been asked earlier:
How long are we going to keep working this ourselves?
Of course, there’s no one number that works for every business or every account. A long-standing customer with a temporary problem deserves different treatment from a new customer who has blown three payment promises and then ghosted you.
But every business should know where the buck stops bucking and its internal collection process does a hand-off.
Internal Collection Has a Cost
When companies think about sending an account to a collection agency, they usually focus first on the fee.
That’s understandable. If an agency collects the account, you know you won’t keep every dollar recovered.
But there’s another side to the same coin (or lack of coin, at the moment).
Keeping an account in-house definitely ain’t free.
Someone is getting paid for sending emails, leaving messages, documenting conversations, checking payment status, escalating internally, discussing the account with sales, and updating management.
I hope they’re doing those things.
For a difficult account, that work continues for months and months.
The cost is partly payroll, but the bigger issue is what your people could be doing instead.
A skilled AR professional spending an hour chasing a stubborn old account is NOT spending that hour managing current receivables, resolving legit disputes, improving processes, or protecting newer accounts from aging into tomorrow’s problems.
That opportunity cost isn’t going to appear on the aging report. You only see it if your eyes are wide open and you’re not covering for it yourself.
Recovery Gets Harder With Age
Aging reports make overdue debt look remarkably tidy.
Thirty days.
Sixty days.
Ninety…
120-plus. (AKA the bad debt graveyard.)
The reality behind those columns is less orderly.
As time passes, circumstances change. Employees leave and documentation becomes harder to find. Businesses experience financial problems and assets get re-allocated. Other creditors take action. Meanwhile, memories of the transaction get ever murkier and the urgency surrounding your invoice fades into obscurity.
Waiting can also change the customer’s perception of YOUR expectations.
If a customer has been 90 days late multiple times without a meaningful escalation, they learn a lot about how much flexibility your payment terms really contain.
The longer an account sits there unresolved, the more important it gets to ask if continued internal effort is STILL the best use of your resources.
Define the Handoff Before You Need It
One reason overdue accounts remain in-house way too long is that nobody ever established a clear handoff point.
Every file is a freestanding, painful judgment call.
That makes for big-time inconsistency. One AR person tends to escalate at 75 days. Maybe another keeps pecking away until 150. A salesperson pleads for more time because the commission is important. Management steps in only after the balance is large enough to attract attention.
A better approach is to establish guidelines long in advance.
Your trigger should consider several factors together:
- Account age
- Balance owing
- Number of failed contact attempts
- Broken payment commitments
- Unresolved disputes
- Changes in payment behaviour
- Customer history
- Information suggesting increased financial risk
The point here isn’t to SOP every micro-decision.
You do want to prevent inertia from becoming your collection strategy, and that requires consistent, relevant and specific guidance.
A Broken Promise Should Count for Something
One of the most important signals in collections is a commitment that wasn’t honoured.
Imagine a customer tells you the cheque is going out Friday.
And Friday comes and goes.
Next you hear that something unexpected happened (heartfelt apologies) and payment will come in the month-end EFT run.
That date… yep… passes too.
Each broken commitment provides new clarity as to what is going on.
The first one can have an innocent explanation. Stuff happens, right? A pattern calls for a different response.
Businesses often continue treating these accounts as if nothing has changed because the customer is still communicating.
Communication is key, but only progress is an open door.
If the conversations keep producing new promises instead of payments, your internal collection process needs an escalation point.
Don’t Let Sales Own the Decision
This can be one of the trickier parts of B2B collections.
If you have sales folk, you’re nodding.
A salesperson who’s spent years nurturing and growing a customer relationship understandably doesn’t want collections activity to cut the throat of future business.
Their perspective deserves consideration.
It shouldn’t become the central perspective.
Sales sees sunk effort and future recurring revenue. AR looks at payment behaviour and Finance sees cash flow and exposure.
Leadership has to get a view of the complete picture.
A customer who generates significant sales while steadily increasing an unpaid balance starts to morph into a very expensive one.
Good account management means bolstering the truly valuable relationships while remaining clear about payment expectations.
Those objectives CAN coexist.
So, What About Those Collection Fees?
This is where lots of businesses hesitate.
Suppose you’re owed $20,000 that’s now overdue.
Sending the account to an agency means giving up a portion of whatever gets recovered. Continuing internally appears to preserve the possibility of receiving the full $20,000.
The flaw in that thinking is assuming both options have the same probability of recovery.
They seldom do.
The real comparison is between the net amount you’re likely to recover now and the net amount you’re likely to recover after more delay, more internal effort, and further deterioration in the account.
In other words, your Net Back.
Receiving most of an overdue balance can be considerably better than retaining the theoretical right to 100% of an account that gets written off as bad debt.
Collection fees should be evaluated as part of the recovery equation, alongside time, internal costs, account age, AND probability of collection.
A Collection Agency Changes the Conversation
Professional collections exist because it introduces something your internal AR department can’t: a clear, very visible change in psychology.
When third-party psychology kicks in, the customer immediately understands that the account has moved beyond ordinary reminders.
That escalation creates urgency and stops the monkey business.
A professional collector also approaches the account away from the competing responsibilities of your internal staff. Our job is to locate the right people, understand the circumstances, negotiate where appropriate, establish payment arrangements, and keep moving the account toward resolution.
At MetCredit, that process combines experienced recovery professionals with technology, data, credit reporting capabilities, and our Solution-Oriented Recovery™ approach.
The objective is straightforward: recover as much as possible while treating people professionally and protecting valuable business relationships wherever possible.
Build a Rule, Then Allow Judgment
The best collection policies leave ample room for common sense.
You don’t need a rigid rule stating that every account goes to collections on day 91. (Not a bad idea, though.)
What you need is a process that forces some kind of decision.
For example:
At a specifically defined point, every qualifying overdue account goes through a formal review.
The reviewer asks if there is a credible payment commitment, a legitimate unresolved dispute, a strategic reason to extend additional time, or clear evidence that continued internal work is getting results.
If the answer is no, the account goes to expert debt collectors.
That simple discipline stops accounts from becoming long-term residents of your aging report.
Know When Your Job Is Done
Your internal AR team plays an essential role in maintaining healthy customer relationships and keeping cash flow from going glacial on you.
Their job shouldn’t include chasing the same unproductive account forever and ever.
Set expectations early, follow up consistently and resolve genuine problems. Give the good customers reasonable opportunities to right the ship.
Then make it easy to recognize the exact point where another “bumping this up in your inbox” email is unlikely to change the outcome.
Knowing when to hand off an overdue account is part of good receivables management.
And the best time to decide where that line sits is before you’re staring at an account that crossed it months ago.
Need a little overdue advice? Reach out to our debt collection experts anytime!
