What Happens if You Can’t Collect the Debt after 90 Days?
When it comes to collecting fees from your debtors, one thing is certain – time is not your friend.
The longer you wait, the lesser the chance that you can collect. As a standard, most industries follow a 90-day rule. After running in circles with your client for 90 days, you will have given them enough time to work on their issues. If they still have not settled your fees, it simply means one thing: they have no intention of paying you.
So, what should you do? At this point, chasing after the nonpaying client on your own will result in nothing. The best option is to forward them over to a qualified collections professional.
Hiring a collections company will bring you to the top of your client’s priority list and will give you an 80% chance of getting paid. If you are still uncertain whether to forward the account or not after the ideal mark, you definitely need to take a look at what happens if you’re unable to collect after 90 days.
1. Reduced cash flow
Cash flow is the money that goes in and out of a company. A positive cash flow, where more money is coming in than going out, enables reinvestment, payment of expenses, provides a safety net against future financial challenges, and creates confidence in the shareholders. The exact opposite, a negative cash flow, is what an uncollected debt will lead to. To make it simple, if more money is going out than in, you will be at risk of not paying your own bills on time, growing your business through innovation and reinvestment, and your company could be on a downward spiral.
90 days is enough time to wait for your client to settle the invoices with you. If it goes beyond that and you ignore the advantage of getting a collections agency involved, it’s as good as accepting the fate that a negative cash flow brings. A collections agency can definitely help you get your cash flow back on track by using their resources to collect successfully, and if possible, quickly.
2. Reduced profit margin
Consistently having unpaid invoices is like a never-ending game of catch-up. As you fail to collect your fees and make up for the unpaid credits, your profit margin will be below the industry average.
A below-the-industry-average profit margin is an indicator that your competitors are doing better than you and you need to improve your performance. It prevents the increase of business expenses that are beneficial to boost sales and maximize profitability, resulting to slow business growth and getting trap in a vicious cycle.
3. Too many unpaid invoices may result in closing down the company
Eventually, a reduced cash flow and profit margin will have severe effects on your business. Without enough money flowing, you will be forced to take loans, and if you find yourself facing multiple unpaid invoices once again, your best option could be to cease your operations.
Conclusion
Every business at some point will face nonpaying clients. If you are dealing with one now with a 90-day past-due invoice, the best thing to do is to forward them over to collections to avoid the unfortunate circumstances that follow.
Trying to chase after problematic debtors on your own will only be a waste of time and energy. Remember, time isn’t on your side. The longer you wait, the riskier it is for you. So, it’s best to consult and hire professionals that already have a proven collection system in place.
One of the many benefits of dealing with Adams, Evens, and Ross is we do not have to learn how to collect your past-due staffing and recruiting debt. Our people are our secret. We are one of the few collection firms large enough to have Staff Attorneys along with Seasoned Collectors, Asset Investigators, and world-class support staff. There is no doubt on why Adams, Evens, and Ross is the only collection firm in the world that is endorsed by 5 funding companies, 14 associations, and 10 recruiting and staffing trade magazines.
To book a FREE consultation, reach out to wilson@aercollections.com or you may click here.
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