About seven in 10 companies in North America deal with business customers who pay late, and overdue invoices make up an average of 23% of their B2B receivables, according to a survey Atradius released in September. The credit insurer polled more than 600 businesses in the United States, Canada and Mexico, which together make 43% of their sales on credit terms.
For companies that sell on terms, such as distributors, staffing firms and property managers, an invoice that stays unpaid long enough forces a decision to either keep chasing the customer or hand the account to a collection agency.
Most Overdue B2B Invoices Clear Within a Month
Atradius found that most overdue receivables are paid within a month of the due date. Companies must decide what to do with invoices that stay open longer than that.
To limit late payments, suppliers in the survey asked for payment in advance, offered cash terms or gave discounts for paying early. About one fifth carried credit insurance or set aside bad debt reserves, and fewer took customers to court or used receivables financing.
Placing the account with a commercial collection agency is another route. An agency working on contingency takes its fee from the money it recovers, so the creditor pays only when the agency collects. Placing the account also takes the follow-up off the finance team’s plate.
What Happens After an Invoice Goes to Collections
Once a founder places an account, the agency decides what to report. A monthly remittance statement shows the money that came back but leaves out which customers the agency reached, what they said, and where a disputed invoice stands. A creditor that plans to keep selling to a customer also needs to know how the agency handled those conversations.
The gap is easy to manage with a few placed accounts, but a company placing new accounts every month depends on the agency’s reports to know where each one stands.
How Collection Agencies Report on Placed Accounts
Southwest Recovery Services, a commercial collection agency based in Addison, Texas, puts real-time account visibility on the seven-point checklist it published for choosing a commercial collection agency, next to state eligibility, B2B specialization, and contingency pricing. The firm, which has 12 offices across seven states, works business accounts on a no-recovery, no-fee basis.
Its client portal lets clients search a placed account by account number, name, or date range and see the latest activity with a timestamp. Activity reports cover a single account or a whole portfolio, with milestones, notes and history updating as the work happens.
Clients can also log payments a customer sends them directly after placement. The portal posts the payment to the account, and the firm stops contacting that customer, so a customer who has already settled doesn’t get another call. Clients can place accounts through a direct API connection to their CRM or property management platform.
“I want to be transparent because clients help me keep my staff accountable,” said Steven Dietz, CEO & Founder of Southwest Recovery Services. “If we mess up, I want them to tell me because I am going to go fix it.”
Collections Decisions Before Year-End
About one-third of businesses in the Atradius survey reported having less cash available. Companies reviewing open receivables before the end of the year will be deciding which accounts to keep working themselves and which to place with an agency. For the accounts they place, the agency’s reporting will determine how much they can still see.
