What Is The Maximum Amount Of Time You Should Give Your Commercial Debtor Before Outsourcing To Collections?

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There are many factors that affect the amount of time you should give your commercial debtor before outsourcing to collections, but the maximum amount of time is six months, and this time frame applies to large accounts or for those with whom you've had a long-term and positive relationship.  By the time the debt has remained unpaid for six months, you will have provided more than enough time for a business to come up with the means to pay off the debt.  For newer customers, or for businesses that have been slow to pay in the past, you shouldn't wait that long. 

Keeping in mind that the longer you wait, the harder it typically is to recover the debt, you might consider giving loyal customers a bit of a break before outsourcing their commercial account to collections.  This is especially true if the commercial debtor has been honest and forthright in communications or in attempting to pay the debt.  If the debtor has ignored your attempts to resolve the unpaid debt, or has promised payments and did not come through, you should consider speeding up the process of outsourcing to collections. 

If the commercial debtor has a large account and you have reasonable hope that the debt will be paid within six months, then you might want to hold off on legal collection procedures, or you will lose a portion of any amount of the debt that is recovered to fees.  However, if the lack of payment is affecting your ability to run your business because the amount of debt is so large, then you may want to speed up the process, as recovering even part of the debt as a result of collection efforts will be beneficial to you.  Your instincts, the debtor’s behavior, and the commercial debtor’s past payment history with you should influence the amount of time you wait before outsourcing to collections. 

Important Questions to Ask Before Taking on International Collections

Outsourcing has moved businesses into a global arena but along with the perks of this comes a very real downside – collecting on unpaid international debts.  In the wake of an economic downturn that has forced many businesses to cut costs by using overseas labor or products, international collections as a viable collections activity has increased.  But is the hassle of dealing with international laws worth the money gained?  

The simple answer is “yes” but that answer comes with a caveat: you have to ask the right questions to determine if international collections will be worth the time and effort you put into these accounts.  And since the laws relating to international debt collection vary from country to country and can often be affected by international treaties, it’s important to be as specific and up-to-date as possible when obtaining the answers to these questions. 

1. What does the original contract say about jurisdiction? Specifically, will courts uphold your contractual jurisdiction clause?
2. Will the court in your home country have jurisdiction over the company in another country?
3. If the court in your home country has jurisdiction over the foreign company, what is the process of serving your complaint on that foreign company, how difficult will the process be, and how long will the process take?
4. If you are able to achieve a judgment in your favor in your home country, how will you collect from the foreign company?  Will the home-based judgment stand in the country of the foreign company or do you need to bring a new lawsuit in that particular country?
5. Would it be easier to just file the lawsuit in the country of the foreign company?
6. Will you be able to seize assets of a company in a foreign country?  What is the process for doing so and will the courts require a bond?  Also, is there a way that the company can claim false seizure and how successful would that claim be if it did?