There is no simple answer to when an account should be placed for collection, but the more of the following statements that are true, the more appropriate it is to forward the account quickly to a third party:

• One or more of the customer's payment checks to you bounce.

• The bounced check(s) do not clear when they are redeposited.

• The account is 90 days or more past due with you.

• You learn tax liens have been placed on the business.

• You learn the debtor is bouncing checks to other creditors.

• The debtor is unconcerned when you threaten to place the account for collection.

• Mail is being returned by the post office.

• The customer's telephone is disconnected.

• The debtor is now using an answering service.

• The debtor is always out and does not return your calls.

• Your debtor refuses to make a reasonable commitment for payment.

• Every conversation turns into an argument.

• The debtor curses at you or hangs up in the middle of a discussion.

• The debtor promises a certain amount will be paid, but instead the debtor pays significantly less.

• The debtor breaks a second commitment for payment.

• You reach an agreement, but the debtor refuses to put anything in writing.

• Long after a payout arrangement is made, the debtor decides to try to renegotiate the deal.

• The debtor hires a consultant or work-out specialist.

• You threaten to sue over an unpaid bill and the debtor tells you to "get in line."

• The debtor company is for sale.

• Other creditors are holding orders, or have placed the debtor for collection.

• Employee turnover within the debtor organization is high.

• Your company is asked to release its perfected security interest, or the business owner's personal guaranty.

• You learn the debtor is looking for a new bank.

• The debtor company offers to pay you from the proceeds of a loan it has applied for.

No matter how polished and professional your collection techniques may be, certain debtors will be unable or unwilling to pay your company. There is no set formula for when to refer an account like this to a third party, but the key is to turn an account over when you feel you are no longer effective in collecting the debt. Unfortunately, often the debtor doesn't believe you're serious until the account is in the hands of a third party.

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter.