When to place an account for collection should be viewed through the mindset of risk aversion. There are signs and signals of increased risks with the statistics clearly favoring a client that takes immediate action upon recognition of a debtor’s financial difficulties.

This section examines factors that a credit professional must consider up to the exact moment that a decision is made when an account is placed for collection. Accordingly, such a decision must be weighted by the passage of time, margin markups, how write-offs affect profits, days past terms, corporate red flags, employee-generated red flags, NSF checks and what some experts say about placement timing.  


  • Having an "Early Detection" procedure which is the process of reclassifying a "customer" to a "debtor" as quickly as possible then taking immediate steps to mitigate the potential loss.
    (click to EARLY DETECTION- A Vital Factor for Effective Collection)
  • Being the first to proceed with collection steps.
  • Using an agency with an effective recovery ratio.
  • Recognizing “RED FLAGS” and immediately reacting.
  • Start in-house collection procedures at ten days past due.
  • Upon discovery of Successor Liability factors – place for collection
  • Determine at 30 days past due if the receivable is a placement candidate.
  • Recognition of a write-off, the relationship to sales and how it affects that profit.

Other characteristics must come into play when evaluating when to take action on a delinquent account. Collection professionals should always consider the following known facts:


NSF CHECKS PLACEMENT PHILOSOPHY – Passing NSF checks and failing to make immediate restitution means that a total financial collapse is imminent. The only exception would be an accounting error, which the debtor can correct immediately. If you are unable to obtain full restitution in the form of guarantied funds within two weeks, then the overdue balance created by the NSF check should be placed for collection immediately. We caution that a part payment should never be accepted on an NSF check, as this negates debtor criminal liability. Accepting part payments serves as absolution and forgiveness of the NSF act. You will hear all kinds of excuses; however, regardless of what a debtor may give you, rest assured the debtor is insolvent.

NSF-BAD CHECK LAWS – Every state has statutes on the books that spell out criminal penalties related to the remitter’s failure to make immediate and full restitution on NSF checks. The reality is that our public law enforcement officials are dedicated to home security, theft and violent crimes of a felonious nature. Prosecutors, district attorneys, and county attorneys realize that on a business transaction, creditors have NSF check remedies available to them through civil procedures. Thus, criminal pursuit of NSF check violators is practically non-existent.



According to Collector Magazine, a creditor should be ready to initiate placement with an agency 90 days after the invoice date or the equivalent being 60 days after terms. Placement prior to this time should be initiated if any “Red Flags” are observed. Minimally, the Credit Department should start in-house collection steps at ten days Past Due Terms (PDT) followed by 3 more attempts within 30 days thereafter. If at any time after PDT when there is no response to a final ultimatum, which may be on the heels of a broken commitment, then it is time to place the overdue balance with an agency. Other indicators suggesting the immediate need to place would be a debtor’s refusal to provide a specific deadline date for payment. “Taking care of the account” is a generic stalling tactic and not a realistic commitment for payment. The nebulous promise to pay, based on nebulous income sources is a precursor to a broken commitment. Disputed claims raised within terms are almost always legitimate. An initial claim of dispute raised beyond invoice terms is probably the most common unfounded dilatory tactic of all. See CUSTOMER DISPUTES – REAL OR BOGUS.

Lending institutions believe a receivable has very little real value at 30 DAYS PAST TERMS (DPT) and absolutely no value at 60 DAYS PAST TERMS. Borrowing covenants requiring a specified asset to liability ratios will always exclude receivables as assets if 30 DAYS PAST TERMS. When reviewing financials, closely place emphasis on the Current Assets and Current Liability ratio. Place minimum importance on Net Worth and goodwill, as these tend to be overstated.

Want to compare your receivable past due status with a national model? Go to NATIONAL PAST DUE AVERAGES OF DOMESTIC TRADE RECEIVABLES RESULTS SUMMARY. These statistics change, which means for current specifics look up the Credit Research Foundation over the Internet.