As with many questions, the answer is “it varies.” It really depends on several points:
- If you run a company, clinic or accounts receivable department, there comes a time when your efforts are better spent with other tasks and accounts than with pursuing significantly overdue invoices. At some point you will likely wonder when you might need a collection agency. Have you reached the point of being too frustrated to pursue collections on your own? Is your time better spent working on other parts of your business?
- The timing to turn over accounts to an agency also depends to some extent on your industry. For instance, in healthcare a clinic may not turn over accounts to an agency for 6 months from date of service because they have to first go through the insurance hurdles. In your particular industry, the pain point may be 90 days. Your company might have its own internal guidelines. For instance, the cut-off could be 120 days.
- Another point to consider is that the older an account gets, the less likely it is that you or the agency will be able to collect any funds. An account that is 90 days overdue is much more likely to be paid than an account that is 6 months, 9 months or a year overdue. Don’t wait too long with placement. There comes a point when even an agency has minimal chances of collecting on your behalf.
- And then there is an actual legal limited when you hit the statute of limitations, at which point you can no longer pursue an account. For instance, in Maryland the statute of limitations is 3 years at the time of this writing.