Q:           We were contacted  by an outside collection agency and were told that the longer we waited to collect our past due account receivables, the less chance we would have to collect those receivables in the future. Is this just a marketing ploy or is there any evidence that turning accounts receivables for collection over to a third –party collector earlier leads to a greater percentage of recovery.

A:            The sales representative was correct.  There is a direct correlation between the age of an account receivable and the prospects for collection.  According to a survey of members of the Commercial  Collection Agency Association of the Commercial Law League of America, the probability of collecting a delinquent account drops dramatically with the length of delinquency.  The survey demonstrated that after only three months the probability of collecting a delinquent account drops to 73.1 %. After six months, almost 56% and after a year, the probability of collecting a delinquent account drops to 25.3%. In this uncertain economy, it is critical for companies to stay on top of their receivables.

                In this economy with many businesses trying to stay afloat, it is important to recognize that these businesses are “robbing Peter to pay Mary.” As a creditor, it becomes important to recognize when  third-party collection efforts may be necessary. The typical approach taken by a third-party collector is to begin to make both written and verbal demands for payment upon receipt of the claim. In some instance that may not prove to be enough to get the customer to pay the receivable or enter into payment arrangements. If the balance of the receivable is $2,500.00 and above, litigation may be an option for your company.  In litigation  your customer may have to retain counsel. It may prove to be a better business decision for your customer to pay your company rather than to pay money to their attorney.  If a judgment is ultimately obtained, you may be in a position to levy on assets.

                The advice given in this article is for informational purposes only. Each case has its own set of fact patterns and there always exceptions to the general rule.  You should always consult an attorney to discuss the circumstances surrounding your case.  If you would like to discuss any issue contained in this article or have a question pertaining to creditors’ rights,   Contact Stephen Gebeloff, Esq. (561)953-4600  or steve@gebelofflaw.com

Mr. Gebeloff is an experienced litigator with the firm of Stephen B. Gebeloff, P.A. in Boca Raton. His primary areas of practice are commercial law, creditors’ rights and construction law. He has extensive experience prosecuting officers, directors and members of entities for fraudulent transfers of assets. He has represented developers, property owners, contractors, subcontractors, material suppliers and design professionals in all facets of construction and debt collection law.