Following up with a client who hasn't paid can be a challenge for most people. If you're a freelancer or small business, it can be especially difficult because it's not your regular job. When invoices go unpaid, however, your business or your livelihood could be at stake. Are you following up with your clients on delinquent payments?
Is it time to hire a third party collections agency for your unpaid B2B invoices?
First Party vs Third Party Collections: What's the Difference?
If you've heard the term 'third party collections', you may have also heard of first party collections. When you are referring overdue invoices to a collections group within your business or if you're handling the accounts receivable delinquency follow-up calls yourself, then you're using first party collections. As a first party collector, you will retain the full amount of whatever you're able to collect. You also have control over the conversations and tone with your B2B or corporate clients.
When the debt is referred to third party collections, it is outsourced to a professional collections agency for a fee. Third party collections agencies have experience with B2B collections and have the technology to efficiently manage the challenges of following up and getting your client to pay.
When Should I Hire a Collections Agency?
Third party collections are typically called in when the account has been deemed uncollectible by you or your accounts receivable department. Payment is usually 45 or more days delinquent or your client is unwilling to pay. Also, the longer the corporate invoices go without payment, the less likely they will be paid at all.
Ask yourself these questions if you're wondering when to hire a third party collections agency:
- Is the invoice 45 or more days past due?
- How long has it been since I've made contact with the B2B client?
- Have I been avoiding following up with the client because they're angry or non-responsive?
- Has the client said that they will not pay the invoice?
- Do I have time to deal with past due invoices or would I rather focus on other business?
How Much Do Third Party Collections Cost?
Most third party collections agencies work on a contingency fee basis. Unless they're able to collect what's owed to you, you don't have to pay anything.
Third party collections may also be able to help with accounts receivable management. A/R management could ultimately save you money by using best practices to get your B2B clients to pay on time.
If the delinquent debt proves to be more challenging than third party collections, the agency may also help review the file and prepare you to take the client to court.
In other words, the cost may be free but the benefits are worth the fees to try it out.
How to Choose a Third Party Collections Agency
If you're still unsure about how third party collections works or how to choose the best agency for your needs, click the green button below to download a free guide.
The guide offers instructions on how and when to hire a third party agency for your B2B collections, what services you can expect, how the agency works with your first party collections team, how you will be charged and more. Contact Enterprise Recovery if you have any questions that we can answer for you.