Collecting delinquent accounts is a challenge. For home furnishings suppliers, it’s vital to build and maintain positive relationships with retail partners – and collecting on an account will only serve to strain that relationship. Unfortunately, there will be a point with some of your accounts where collecting is the only option.

In this article, we’d like to talk about the pieces of information you’ll want to gather before turning an account over to collections. Having the correct information available – and as much of it as possible – will only make it more likely that you’ll recover something from a delinquent account.

Collecting Delinquent Accounts: The Basics

You should have a system to determine which of your past-due accounts will go to collections. For instance, you can trigger the collections process if an account reaches 120 days past due with a balance over a given amount. Whatever your threshold may be, it’s essential to be consistent across your accounts.

Once an account has reached the point where collecting is the only option, assemble the following essential pieces of information –

• The invoices that are past due, including due dates and balances
• Contact information for the business; specifically, details on ownership and how to reach the accounting department. You can collect this information from the owner or an officer of the company in a New Account Credit Application.
• The credit application or any relevant contracts or other agreements between your company and the debtor

This list includes the information required by a collection agency when they start to work on an account. Filling in as many gaps as possible with complete details will make it easier to track down payments and collect some delinquent accounts.

Evaluating Patterns

Commercial credit accounts tend to fall into patterns of payment. Some accounts will pay as soon as possible every time to ensure they take advantage of whatever discounts are available. Other accounts will always lag, either because they struggle to make ends meet or resist making payments until they are encouraged.

Be sure to evaluate any account headed to collections to see what kind of payment pattern emerges. If an account is always lagging, they may have let it go longer than expected and will be able to make a payment if contacted directly. Conversely, an account that always pays early and suddenly has stopped paying may be facing a crisis.

Dig a Little Deeper

Beyond the basic information, there are other important points to check on before you consider collections. As a starting point, is the business still open? If you aren’t receiving payments and no one is taking your calls, the company may have gone out of business entirely. Or, they may be under new ownership, making it challenging to collect delinquent accounts in some cases.

You may need to do some legwork to get to the bottom of some of your delinquent accounts. Promptly doing that work is essential, however, as the difference between recovering some of your money and writing off the entire account could depend on how quickly you take action.

Learning Lessons

Sometimes, you won’t get any money out of an account, even if you gather up all the information you can find. While that will be a painful write-off, you can still learn something from the experience that may help in the future. Go back and look at the information you collected from the company during the credit application process. Why were they approved for credit, and were there any warning signs you missed (one way to reduce this is by regularly getting credit reports on this type of account)? By using accounts that go bad as a learning experience, you can refine your lending process and do better in the future.