How to Send an Invoice to Collections

An unpaid invoice can significantly disrupt a business’s financial stability. An invoice serves as a formal request for payment for goods or services provided, detailing the amount due and payment terms. When these invoices remain unpaid beyond their due dates, they become delinquent, potentially leading to cash flow issues for the business. In such situations, engaging a collections agency becomes a viable option to recover the outstanding funds. This guide aims to provide a clear, practical roadmap for businesses to navigate the process of sending an unpaid invoice to collections. It outlines the necessary preparation, the selection of a suitable agency, the submission process, and what to expect once the account is in collections.

Gathering Information and Documentation for Collections

Before contacting a collections agency, businesses must gather all relevant information and documentation for the unpaid invoice. Accurate and comprehensive data is crucial for effective debt recovery.

For each unpaid invoice, include the original invoice number, invoice date, and specific due date. Document the total amount due, with a detailed breakdown of charges like labor, materials, taxes, or fees. Record any payment history, including partial payments, credits, or adjustments.

Accurate debtor information is also important for the agency to identify and contact the responsible party. Include the full legal name of the individual or business, current mailing address, and all available contact numbers. A Social Security number or Employer Identification Number (EIN) can assist agencies in locating hard-to-find debtors.

Compile supporting documents to substantiate the debt. These include copies of the original invoice, signed contracts or agreements, and relevant purchase orders. Document all communication attempts with the debtor, including dates, methods (phone, email, letter), and conversation summaries, noting any payment promises or disputes. Proof of delivery (e.g., signed receipts, photographs, email acknowledgments) strengthens the case. Clear records protect the business and ensure compliance with debt collection regulations.

Selecting a Collections Agency

Selecting a collections agency requires careful consideration. Choose agencies that operate ethically and comply with federal and state regulations, such as the Fair Debt Collection Practices Act (FDCPA). Review their industry reputation and client testimonials for insights into professionalism and success.

Select an agency with expertise in your debt type (e.g., B2B or B2C). Verify the agency holds all necessary state licenses and registrations.

Understand the agency’s fee structure. The most common is a contingency fee, a percentage of recovered funds (typically 20-50%). Some offer flat fees for specific services. Clarify included services and when fees are assessed.

Ask specific questions to make an informed decision. Inquire about communication methods and update frequency. Understand their reporting frequency and types of reports. Ask about dispute handling procedures and client onboarding requirements.

Submitting Accounts to a Collections Agency

After selecting an agency, transfer the delinquent account information. Ensure all documentation reaches the agency securely and completely. The agency provides specific instructions and preferred methods.

Common submission methods include the agency’s online portal for secure data upload. Many also accept secure email or physical mail for original documents. Some agencies provide specific forms to complete for each account.

These forms streamline internal processes and capture necessary data. Follow instructions carefully, ensuring accuracy and completeness. Confirm all supporting documents (invoices, contracts, communication logs) are attached or uploaded as specified.

Expect confirmation from the agency upon successful submission. This may be an automated email, online portal confirmation, or direct communication. This confirms accounts have been received and are processing. Maintain a record for internal tracking.

What Happens After Submitting to Collections

After submission, the agency begins efforts to recover the debt. Initial steps involve reviewing documentation to understand debt specifics and confirm claim validity before contact.

After review, the agency contacts the debtor. This often begins with a legally required debt validation letter sent within days of first contact. The letter includes the debt amount, original creditor, and informs the debtor of their right to dispute within 30 days. Subsequent attempts may include phone calls, emails, and text messages, adhering to consumer protection laws.

The agency maintains consistent communication with the client. Updates on collection attempts, debtor responses, and progress are regularly provided. Updates may be delivered via online portal, email, or scheduled calls, allowing tracking.

When funds are recovered, the agency handles payment receipt and disbursement. The agency processes recovered funds, deducting its agreed-upon contingency fee. The remaining balance is remitted to the client on a predetermined schedule (e.g., monthly or bi-weekly). The agency provides detailed reports itemizing collections, fees, and disbursements. Outcomes range from full payment or negotiated settlements to the debt being deemed uncollectible, which may lead to further discussions.