When Is “Too Early” To Begin a Collection Effort?

It is not uncommon for companies to have a “grace period” for customers who have past-due balances before collection efforts begin. This grace period may last anywhere between a few days to an entire month – with this in mind, is it ever too early to begin collecting on an unpaid bill? We believe the answer is no – and here’s why. A grace period for non-paying customers is only helpful to customer relations if the business fully intended to make payment but simply forgot or is waiting for authorization from a higher-up who’s out of town; in this situation, a collection call immediately after an invoice becomes delinquent can hurt the business relationship. However, this is not the situation in most instances when bills aren’t payed. If a customer doesn’t plan on paying their bill, a grace period between the due date and the first collection call simply provides them with more time to stall. With this in mind, we recommend beginning collections as soon as a bill isn’t payed; this could simply mean sending the first letter requesting payment-in-full (in a professional and courteous tone) so they know you’re keeping track of their account and won’t tolerate non-payment. If this first letter doesn’t yield a payment, it’s likely time to start your collection effort. The longer you wait to collect on an account, the less likely it becomes that payment will ever be received, so get your debt collectors on the phone with  non-paying clients sooner rather than later. You’ll likely notice an improvement in collection success if you eliminate the unnecessary grace period before your credit department begins working on a claim. Furthermore, if you are considering sending a customer’s account to debt collections, the longer you wait the less likely the collection agency will be successful in collecting on the account, so don’t wait around. Once the decision has been made to employ a collector, get the debt collector the information they’ll need to begin working as soon as possible.

About The Author:

Dean Kaplan is Principal at The Kaplan Group. Dean's exper­tise is widely rec­og­nized in the debt col­lec­tion indus­try. His advice has been pub­lished in a num­ber of indus­try newslet­ters such as Credit Today and InsideARM and he is a fre­quent speaker at indus­try events.