When does a past-due payment turn into bad business debt? Is there a certain time to call in the experts? The golden rule for decreasing bad business debt is establishing credit and accounts receivable policies that align and sticking to them! Then, follow this timeline to getting your customers to pay!
| Day 0 | Send Invoice |
| Day 15 |  For new customers or large invoices, a pro‐active call to confirm that they received your invoice and that the shipment is correct is a good way to avoid a dispute later and to make sure your invoice is in line for payment. |
| Day 35 |  Depending on the payment agreement….Past Due reminder notice. Whether there is confusion on the due date or intended delinquency from the customer, this is necessary. |
| Day 45 |  Send Past Due follow up notice on smaller accounts and make initial past due call on larger accounts. If time permits on smaller accounts, a call is better than written communication at this stage. |
| Day 55 | Initial past due call or follow up call depending on day 45 action. |
| Day 65 | Termination of credit notice or send a 60‐day demand notice. |
| Day 80 | Final Demand phone call |
| Day 90 | Final Demand letter |
After Day 90…
Always turn to a third party collection agency to help. According to the “Collection Trends: Commercial Collection Agency Association of the Commercial Law League of America” survey conducted by the Commercial Collection Agency Association, the probability of full collection of a delinquent customer account drops significantly with the length of time. After 90 days, the probability of payment drops to 69.9 percent; after six months the probability of payment drops to 52.1 percent; and after one year the probability of payment drops to 22.8 percent.
Don’t wait until it is too late. Consulting an expert at a third party collection agency will better your payment chances. But remember, if you threaten to use a third party resource in a final demand letter, you must follow through.
When in this process is a past due invoice considered bad business debt?
If you have followed the collection timeline, contacted your customer to make sure they have received your notices and have still not been successful as to when the customer will pay, the account has turned into bad business debt.