How to Send Unpaid Invoices to a Collections Agency

For businesses of all sizes, unpaid invoices can be a nightmare. According to research, 60% of small firms struggle with cash flow due to past-due payments. According to a recent study, 72% of businesses said that payment processing also impacted their ability to grow their business.

If you are tired of pursuing clients for payments and worrying about financial flow, you are not alone. According to a World Bank analysis, bad debt costs businesses $3 trillion annually. However, there's a proven solution to reclaiming what you're owed without damaging your reputation: collections agencies.

This article provides a step-by-step guide on how to send someone to collections. By the end of this guide, you’ll have the knowledge and confidence to turn bad debts into recovered funds efficiently and professionally. 

Understanding When to Consider Collections

It could be time to escalate the issue if invoices are unpaid after several reminders. But how do you send someone to collections?

Signs It's Time to Act

• Overdue by 90+ Days: Invoices that are past due by 90 days have a far lower chance of being paid without assistance.
• Unresponsive Debtor: Your client may be purposefully evading payment if they avoid answering calls or emails.
• Impact on Cash Flow: It's a warning sign when late payments threaten your company's financial stability.

Alternatives for Collections

Before turning to a collections agency, consider these options:

• Payment Plans: Give customers the option to make payments over time.
• Discounts for Fast Payment: A small discount could encourage a debtor to settle quicker.
• Small Claims Court: Filing a lawsuit may be a more affordable option for minor sums.

Pro Tip: Before escalating, always record each step. Detailed records strengthen your case during the collections process. 

After trying every other alternative, prepare yourself for the collection process.

Preparing for the Collections Process

Preparation forms the foundation of a good collecting process. Document your case and examine it thoroughly before working with a collections agency. Being well-prepared speeds up the procedure and raises the possibility of a successful recovery of your money. 

1. Gathering Documentation

To start, collect all relevant paperwork:

• Copies of contracts, agreements, and invoices.
• Evidence of delivery, such as emails confirming the fulfilment of the service or signed receipts.
• Communication records, such as call logs and emails, serve as reminders.

For Example: South East Client Services (SECS), a reputable collections partner, advises businesses to organize their documents for faster processing. Their technology-driven approach ensures quick due diligence and minimizes delays. 

2. Assessing the Debt

Take time to verify the accuracy of the debt. Verify that the amount due corresponds to the agreed-upon terms and matches the original invoice. Double-check all associated records to prevent mistakes that may undermine your reputation with the debtor and the collections agency. 

3. Evaluating Costs and Benefits

Consider whether escalating the matter is worth the effort. 

Evaluate:

• Does the potential recovery outweigh the agency’s fees?
• Could sending the debt to collections damage long-term client relationships?

By weighing these factors, you may make an informed decision about what's ahead.

The next step is to choose a collections agency that fits your requirements and goals after carefully compiling your documents and evaluating your situation. 

Selecting a Collections Agency

Selecting a suitable collections agency is one of the most important steps in recovering unpaid invoices. You can recover debts with the assistance of a skilled and knowledgeable organization without compromising your commercial partnerships. 

On the other hand, the wrong choice may lead to wasted resources and further complications. 

By partnering with a reputable agency like South East Client Services (SECS), known for its compliance-driven and technology-enabled approach, you can ensure both efficiency and professionalism in handling your debt recovery. Their customized approaches serve a wide range of industries, which makes them a reliable option for numerous businesses. 

1. Researching Options

Choose a collecting agency that specializes in your sector. Specialized agencies are more likely to understand your business and your clients' nuances. For instance, various industries recognize SECS's ability to manage receivables while strictly abiding by debt-collecting regulations.

2. Evaluating Services

When evaluating potential agencies, ask the following:

• What is their success rate in recovering debts?
• What are their fees—do they charge a flat rate, a contingency fee, or both?
• Can they handle both domestic and international cases?

An agency’s approach to these factors will help determine whether they fit your needs.

3. Ensuring Compliance

Selecting a collections agency that operates ethically and complies with relevant debt collection laws, such as the Fair Debt Collection Practices Act (FDCPA) in the U.S. or equivalent regulations in your country. Agencies like SECS prioritize adherence to these laws, ensuring their operations are ethical and practical.

Pro Tip: Check an agency's credibility and success record by reading client testimonials and requesting references before working with them.

The next step is initiating the collections process and working toward your unpaid invoices back after choosing a reliable firm. 

Initiating the Collections Process

It takes a systematic approach to begin working with a collections agency. Clear communication and thorough organization set the foundation for a successful partnership. Collecting and sharing all relevant information can improve your chances of recovering your unpaid invoices. 

1. Notifying the Debtor

Send a final demand letter to the debtor before formally seeking the help of a collection agency. This letter should:

• Indicate the amount owed and the due date.
• Include a warning that failure to pay will escalate the matter to a collections agency.

A well-drafted demand letter can sometimes prompt payment without further action, saving you time and effort. 

How do you send someone to collections? Notify the debtor and provide the agency with complete documentation.

2. Providing the Agency with Information

After deciding to work with a collections agency, provide them with complete documentation, including:

• The due date and the original invoice.
• The payment terms are agreed upon with the debtor.
• Document all communications, such as emails, phone call logs, or written reminders.

Thorough documentation helps the agency build a strong case and expedite recovery. Reputable agencies, such as South East Client Services (SECS), analyze these records using advanced tools to create successful recovery plans. 

3. Signing an Agreement

Before the agency begins work, you'll need to sign a formal agreement. Ensure you carefully review the terms, including:

• The agency's fee structure (e.g., contingency fees, flat rates, or both).
• Their estimated timeline and method of debt recovery.
• Any results-related guarantees or disclaimers.

For Example: SECS is renowned for its open contracts that detail each step of the procedure. Their client-focused strategy builds confidence and trust by ensuring businesses know what to anticipate.

Although the collections agency is actively working on your behalf, monitoring their developments and receiving updates at every stage is critical. 

Navigating the Collections Process

To obtain payment, the collections agency uses its expertise to take over contact with the debtor during this phase. To guarantee a smooth recovery, you must remain informed and involved as they oversee the procedure. 

• Agency’s Methodssome text
  • Establishing communication with the debtor by email, letters, or phone calls.
  • Negotiating settlements or structured payment plans when full payment isn't feasible.
• Monitoring Progresssome text
  • Ask the agency to provide you with regular case status updates.
  • Use resources that offer real-time insights into the recovery process, such as SECS's web dashboards.
• Handling Resolved Casessome text
  • To guarantee accurate financial records, reconcile your accounts as soon as the debt is reclaimed.
  • Preserve the resolution's supporting paperwork, such as payment confirmations for future use.

While recovering money is a win, putting proactive measures in place to reduce the likelihood of future unpaid invoices is just as important. 

Best Practices and Tips for Avoiding Future Issues

It is much more efficient to prevent than to deal with overdue invoices. You may significantly lower the possibility of running into payment problems later on by putting proactive measures into place and preserving strong client relationships. 

• Proactive Invoicing and Follow-Up: Invoices should include payment terms and due dates. Automated reminders should be sent out both before and after the due date to guarantee on-time payment.
• Establishing a Credit Policy: Before signing contracts, check the creditworthiness of potential customers. To prevent misunderstandings, establish clear, agreed-upon terms for payments right away.
• Maintaining Relationships: Maintain regular communication with your clients. Preserve your business relationship and prevent the need for escalation by taking prompt action to address any possible payment delays.
• Offering Multiple Payment Methods: To make it as easy as possible for customers to make their payments on time, offer a range of payment choices, including online solutions like digital wallets, bank transfers, and credit cards.

Pro Tip: You're more likely to get payments on time if you make it simple for customers to pay.

Ensuring compliance and ethical practices is the final piece of the puzzle. 

Legal and Ethical Considerations

Navigating the debt collection process requires careful attention to legal and ethical standards to avoid potential legal or reputational issues. Following the correct procedures guarantees that your business stays compliant and maintains your clients' trust. 

1. Compliance with Debt Collection Laws

Any collections agency you work with must comply with relevant debt collection laws. Agencies must comply with the Fair Debt Collection Practices Act (FDCPA) in the United States and the General Data Protection Regulation (GDPR) in Europe to safeguard client data. You reduce the possibility of facing legal consequences by ensuring compliance with these regulations. 

2. Respectful Communication

Recovering debt should always be approached with dignity and expertise. It is crucial to avoid using threatening or aggressive strategies that could damage your company's reputation. By maintaining respectful communication, you safeguard your relationships and uphold the integrity of your business practices.

South East Client Services (SECS) emphasizes ethical collections practices, ensuring that they communicate respectfully and aim to preserve your long-term relationships with clients.

Pro Tip: Select firms prioritizing ethical practices to ensure legal compliance and uphold your company's reputation.

Conclusion

Sending unpaid invoices to a collections agency requires a strategic approach, starting with thoroughly preparing documents, choosing the right agency, and closely monitoring the progress. Taking these steps ensures a smooth and effective recovery process. 

Future unpaid debts can be avoided by adhering to best practices such as proactive invoicing, maintaining relationships, and ensuring you comply with the law.

Choosing the right collections agency is crucial for successful debt recovery. South East Client Services (SECS) excels with its commitment to ethical practices, transparent procedures, and effective communication, making it a trusted partner in managing overdue accounts.

If you're looking for a reliable agency to handle your overdue invoices, SECS is ready to help you recover what's owed while preserving your business's reputation. Contact SECS today to start the recovery process and regain control of your cash flow!