The Best Way to Collect Past Due Accounts Receivable

Most past due accounts are not lost because the customer could not pay. They are lost because nobody chased them on a schedule. The invoice went out, a reminder went out, then the person who owned it got busy, and by the time anyone looked again the account was five months old and the customer had stopped answering.

After twenty years on the creditor side of these files, the pattern I see most is not bad customers. It is inconsistent process. The companies that get paid are rarely the ones with the toughest letters. They are the ones whose next step always happens on the day they said it would. Here is the playbook, stage by stage, and how to tell when it is time to hand the account to someone else.

Key takeaways

• The best way to collect past due accounts is a fixed escalation schedule that actually runs. Every stage should change something the customer can see: the question, the person reading it, or the consequence.
• The first contact assumes an administrative problem and fixes it. A large share of slow payment is a missing purchase order, a wrong address or an invoice that never reached the person who approves it.
• Ask for a date, not an update. A commitment without a date is a decline nobody wanted to say out loud.
• Escalate the recipient before you escalate the tone. Two months of messages to someone without authority to pay is a queue, not a collection process.
• Name a deadline and a consequence once, and only when you will carry it out. An unenforced deadline makes every later message weaker.

What is the best way to collect past due accounts receivable?

Direct answer

Use a fixed escalation schedule and keep to it. Confirm the invoice landed, get a specific payment date, escalate to a decision maker if it slips, hold credit, send one final notice with a real deadline, then place the account. Each stage must change something the customer can see. Consistency recovers more than any wording.

The reason this works is not psychology. It is predictability. Accounts payable departments sort their stack by consequence. A supplier whose deadlines have always held gets paid before a supplier whose fourth reminder looks exactly like the first. You are not trying to be the loudest creditor in the pile. You are trying to be the one whose next step is certain.

The practical version of that is a written schedule with an owner. Not a policy document nobody reads, a calendar that says what happens on day 15, day 30, day 60 and day 90, and a named person who makes it happen. The rest of this article is what each of those stages should actually do.

What should you do in the first 30 days past due?

Direct answer

Assume a paperwork problem and remove it. Resend the invoice to the right person, confirm the purchase order reference, ask whether it is scheduled and for which payment run. By day 30, ask for an exact payment date. Most early slow pay is administrative, and the goal is to find that out fast.

In the first two weeks, almost nothing is a refusal. The invoice went to a general inbox. The purchase order number was missing. Someone is on vacation. A friendly message that resends the invoice and offers to fix anything that is wrong clears a surprising amount of this without anyone getting tense.

By day 30 the question changes. "Any update?" can be answered with "we are looking into it" forever. "Which payment run is this going into?" cannot. You want a date, and once you have one, you follow up the morning after it passes rather than waiting another two weeks to find out it did not happen.

This is also the stage to call, not just email. The email delivers the document. The phone call gets the commitment, and it tells you things an inbox never will: hesitation, a controller who just left, a company that has quietly stopped approving anything.

What should you do between 30 and 90 days past due?

Direct answer

Change who is reading it. Take the account to a controller, finance manager or owner with a short factual history: what was delivered, when it was invoiced, who was contacted and what came back. Put further credit on hold. Then send one final notice with a calendar deadline and the specific step that follows it.

This is the stage where most internal collection stalls, and almost always for the same reason. The messages get firmer while the recipient stays the same. If the person you have been writing to could approve the payment, they would have. Going above them is not aggressive. It is just sending the request to someone who can actually say yes.

Keep the history short and factual. Three sentences that establish there is no dispute are worth more than three paragraphs of frustration, because they remove the easiest way to park the account for another month.

Credit hold matters here too. A customer who can still order while an old invoice ages has no reason to prioritize you. Holding new orders until the account is current is usually the single most effective lever a supplier has, and it is entirely within your control.

Then the final notice. One, with a date on it and a named consequence, sent only if you will carry that consequence out on that date. A second final notice tells the customer your deadlines are negotiable, and every message after that is discounted accordingly.

Should you offer a payment plan?

Direct answer

Often yes, when the customer is willing but short of cash. Put it in writing with specific amounts and dates, make the first installment meaningful, and agree up front what happens if a payment is missed. A payment plan with no consequence attached is simply a slower way of not getting paid.

A payment plan is a good outcome when it is real. It keeps the relationship, it gets money moving, and it gives you a documented commitment that is far easier to enforce than a vague promise. The mistake is accepting a plan with no first payment, no dates and no agreed consequence, which converts a past due account into an indefinitely past due account.

If you have a signed agreement that allows for collection costs or collection agency fees, those charges may be included in the amount sought during collection. If legal action becomes necessary, recoverable fees and costs are determined under applicable state law and are ultimately subject to the court.

When should a past due account go to a collection agency?

Direct answer

When your contacts stop producing new information. If several attempts have produced no payment, no dispute and no dated commitment, internal collection has done what it can. For most commercial terms that is somewhere between 90 and 120 days past due, and every month past that point costs recovery odds you will not get back.

Age is the strongest single predictor of what gets recovered on a commercial account. People who knew the history leave, documentation gets harder to assemble, and a customer in trouble pays the creditors who pushed first. Most accounts that arrive for collection come in near 180 days, well past the point where the odds were best.

We work commercial claims from $1,000 to hundreds of thousands of dollars, under 120 days past due, and that number is worth building your own schedule around. Be careful of anyone who quotes you a hard success figure: a suspiciously high published rate usually means the agency is making the number up.

That is why it is important to use a certified commercial collection agency. Sven works with C2C Resources, which is certified by the Commercial Law League of America, endorsed by the International Association of Commercial Collectors, carries a $500,000 surety bond, and holds collection licenses in the states that require them.

How do you stop accounts going past due in the first place?

Direct answer

Fix the front end. Use a written credit application with your terms in it, confirm the right billing contact before the first invoice, send invoices that match the purchase order, review aging every week with one named owner, and hold credit automatically at a fixed age. Most chronic past due balances are process problems, not customer problems.

If your past due list is long every quarter, collecting harder will not fix it. The causes are usually upstream: invoices with errors that trigger disputes, terms that were never agreed in writing, nobody owning follow up, and customers who learned that your due date is a suggestion.

A few changes do most of the work:

• Terms in writing before the first order. A signed credit application that states your terms is what makes everything later enforceable, including any service charge.
• The right contact from day one. Ask who approves payment and where invoices should go before you send the first one.
• Invoices that match. Purchase order number, ship date, quantities. Every mismatch is a reason to set the invoice aside.
• A weekly aging review with an owner. One person, every week, working the list rather than glancing at it.
• Automatic credit hold. A fixed age at which new orders stop, applied to everyone, so it is never a personal decision in the month it is hardest to make.

For related reading, our guide to managing delinquent accounts receivable covers the reporting side, and the industry pieces on construction collections, staffing agency collections and equipment rental collections show how the same schedule bends to each trade.

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Frequently asked questions

What is the best way to collect past due accounts?

Run a fixed escalation schedule and keep to it. Confirm the invoice was received, get a specific payment date, move the account to someone with authority to pay if that date slips, put credit on hold, send one final notice with a real deadline, and place the account when that deadline passes. Consistency moves more money than tone or wording does.

When should a past due account go to a collection agency?

When internal contact has stopped producing new information: no payment, no dispute and no dated commitment across several attempts. For most commercial terms that lands between 90 and 120 days past due. Waiting longer rarely helps, because age is the strongest single predictor of what eventually gets recovered.

Should I offer a payment plan on a past due commercial account?

Often, yes, if the customer is willing but short of cash. Get it in writing with specific amounts and dates, keep the first installment meaningful, and agree up front what happens if a payment is missed. A plan that holds beats a placement. A plan with no consequences is just a longer delay.

Can I charge interest or late fees on past due invoices?

Only what your paperwork supports. If you sell on credit terms such as net 30, any service charge or interest has to be in the written credit agreement. If your invoices are due upon receipt, a state statute may allow a charge even with nothing in writing, and you should confirm that against that state's own statute before you add it.

What size of claim can you help with?

We work commercial claims from $1,000 to hundreds of thousands of dollars, under 120 days past due, on contingency, so there is no fee unless we collect. Commercial (B2B) collections only. We do not collect consumer debt. Yes, we collect internationally. Talk to us about your specific account.

Laws vary by state and change over time, and the facts of each account matter. This article is general information from a commercial collections professional, not legal advice. Written by Sven Nelson, The Guy That Gets You Paid.