Accountants are often reluctant to be firm with clients that have outstanding bills. Therefore, a collection agency should sometimes be used. The likelihood of collection decreases as bills get older. The following chart, reprinted with permission from IOMA, bears this out.

Here are some pointers on hiring collection agencies:

• Use more than one and compare their results.
• Don’t decide based on fees alone. Lower rate agencies may collect less.
• When checking references, ask for a rating on a scale of one to 10, and ask if that agency would be used again.
• Make a surprise visit to the agency to see how it operates.
• The agency should be bonded.
• If you wait until the invoice is six months old, even the best agency probably won’t collect it.
• Negotiate a lower fee for accounts turned over at 60 days.Don’t allow the agency to commingle your funds with its funds.
• If an agency fails to collect an account, that doesn’t mean another agency won’t succeed.

There are investors who buy old accounts, usually paying only five percent. See http://www.dbainternational.org/.

From Partner’s Report—the Monthly Update for CPA Firm Owners, September 2006, p. 7. For subscription information contact Institute of Management & Administration, Inc., 3 Park Avenue, 30th Floor, New York, NY 10016-5902. One-year subscription $349. 212-244-0360, [email protected]. For the complete article, click here.