InsideArm recently took an in depth look at the relationship between collection agencies and the Better Business Bureau. What they found was that many agencies use the BBB as a marketing and defense tool. While maintaining a relationship with the BBB may require dedication to responding to angry debtors, it can also show clients that an agency is dedicated to customer service.

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The age of an account can have a great affect on it’s collectability. In most circumstances, the older an account is the more difficult it is to collect.

As time goes on it can become more difficult to locate a debtor. People move to new homes, new towns, new states. They change phone numbers and jobs. They may do this several times over the course of a few years. Each change can make locating a debtor more difficult. If you can’t find them, you can’t get payment from them.

The collectability of an account goes down as the account nears the statute of limitations. The statute of limitations on an account is the number of years you have to pursue an account from the last date of charge or payment (whichever is most recent). For example, the statute of limitations in the State of California is 4 years for a written contract. You would have 4 years from the last date of payment or the last charge to take that account to court. Each state decides the statutes of limitations for different types of accounts – open accounts, judgments, oral contracts,etc.

The faster you can move forward on an outstanding account,the more likely you are to receive the payment due to you. This is truly a situation where time is money and the more time you let pass the greater the chance you’re letting your money slip away.

Statutes of Limitations by State

When managing past-due consumer collection accounts, it is important to understand the reason for non-payment. Knowing why a customer cannot or will not pay can help you determine the next, most effective action and increase your odds of collecting the past due amount.
The first step is identifying what type of customer you are working with. There are four types:

Willing and Able – This person is your ideal customer. They have the resources to pay their outstanding invoices and are willing to pay. This person usually finds him or herself in debt because of some error. For instance, maybe the invoice was lost in the mail.

Unwilling but Able – This customer has the resources to pay, but refuses. Maybe he or she has some dispute regarding the balance owed or was unhappy with the product or service. In this case, finding a solution to the dispute is often possible and will lead to payment.

Willing but Unable – This person wants to pay, but cannot for financial reasons. They acknowledge the bill and may have even made some effort to pay, but cannot take care of the whole balance. Working out a payment plan is usually the most helpful option for this customer.

Unwilling and Unable – This customer is often the most difficult to work with. He or she refuses to pay and can’t afford to do so anyway. Diffusing the dispute and attempting to set up a payment plan are the best courses of action with this customer.

Identifying the type of customer you’re working with is a valuable first step in the collection process. Once you know your customer’s needs you can work with him or her towards a resolution.

Trying to get payments out of customers can be difficult and awkward. You’ve already provided services and now you’re waiting for payment. A soft approach is often ideal for maintaining a customer relationship, however sometimes it doesn’t work. You’re left with unpaid invoices and looming bills of your own. So, how can you get those invoices paid?

It is important to recognize that the longer a debt sits, the harder it becomes to collect. A proactive approach is always best. You have to decide what level of escalation you feel comfortable with and how badly you need payment, then decide the best course of action. Sending monthly statements and circling unpaid invoices can help draw attention to unpaid debt, which is helpful if you’re dealing with a customer that is a little lax on accounting procedures. Making phone calls directly to the individual or accounts payable department can make the issue a priority for your customer, rather than something that sits on the back-burner. Occasionally, you have to show a customer that you’re serious. This could mean sending the account to a collection agency. Customers often take demands for payment more seriously when they come from a collection agency. Suddenly, they become aware that there may be consequences for lack of payment. Regardless of the method you choose for collecting past due accounts, always be sure your own accounting records are accurate. It is the best way to avoid disputes regarding amounts owed or misapplied payments.

How to collect your money
How to collect money from slow paying customers