Dealing with unpaid invoices in digital advertising can be a challenging and frustrating experience for businesses. It’s important to have a recovery system in place to ensure that funds owed to the company are collected in a timely manner. In this article, we will discuss a 3-phase recovery system for unpaid invoices in digital advertising and provide key takeaways for effectively managing this process.
Key Takeaways
- Implement a 3-phase recovery system for unpaid invoices
- Utilize skip-tracing and investigation to obtain debtor information
- Consider forwarding cases to affiliated attorneys for legal action
- Evaluate the possibility of recovery before proceeding with litigation
- Understand the competitive collection rates for different types of accounts
Recovery System for Unpaid Invoices
Phase One
The initial stage of the Recovery System is critical for setting the tone of the collection process. Within 24 hours of an unpaid invoice being reported, our team takes swift action to address the issue. A series of four letters is dispatched to the debtor via US Mail as a formal notice of the outstanding debt. Concurrently, we conduct a thorough skip-tracing and investigation to gather the most up-to-date financial and contact information available on the debtors.
Our collectors engage in persistent efforts to reach a resolution, utilizing a variety of communication methods including phone calls, emails, text messages, and faxes. It is our standard practice to make daily attempts to contact the debtors during the first 30 to 60 days. This phase is designed to exhaust all amicable solutions before escalating the matter.
If these attempts do not yield a satisfactory resolution, we transition to Phase Two, which involves forwarding the case to one of our affiliated attorneys within the debtor’s jurisdiction.
The effectiveness of Phase One can be summarized in the following points:
- Formal notification of debt via US Mail
- Comprehensive skip-tracing and debtor investigation
- Daily communication attempts for 30 to 60 days
Our goal during this phase is to resolve the unpaid invoices amicably, maintaining a professional relationship with the debtor while securing the owed funds.
Phase Two
Upon escalation to Phase Two, the case is transferred to a local attorney within our network. This marks a significant shift in the recovery process, as the attorney’s involvement adds a layer of formality and urgency to the demand for payment. The attorney will undertake the following actions:
- Draft and send a series of demand letters on law firm letterhead.
- Initiate contact with the debtor through phone calls to supplement the written demands.
If these intensified efforts do not yield results, a detailed report will be provided to you, outlining the challenges encountered and the recommended course of action for Phase Three.
It is crucial to understand that the transition to Phase Two signifies a more assertive approach to debt recovery, leveraging the legal standing and resources of the attorney to press for a resolution.
The costs associated with this phase are contingent on the number of claims and the age of the accounts, as outlined in the table below:
| Number of Claims | Accounts < 1 Year | Accounts > 1 Year | Accounts < $1000 | Attorney Placed Accounts |
|---|---|---|---|---|
| 1-9 | 30% | 40% | 50% | 50% |
| 10+ | 27% | 35% | 40% | 50% |
These rates reflect the increased effort and legal expertise required to manage and recover unpaid invoices at this stage.
Phase Three
Upon reaching Phase Three of the Recovery System for Unpaid Invoices, a critical decision point is encountered. If the investigation suggests that recovery is unlikely, the recommendation is to close the case, incurring no further costs. However, if litigation appears viable, you are presented with a choice.
Should you opt for legal action, you will be responsible for the initial legal expenses, which generally fall between $600 and $700. These costs cover court fees, filing charges, and other related expenses. It’s essential to understand that these fees are necessary for the affiliated attorney to initiate a lawsuit on your behalf, aiming to recover the full amount due, including the costs of filing the legal action.
In the event that litigation does not result in successful collection, the case will be considered closed, and no additional fees will be owed to the firm or the affiliated attorney. The decision to litigate should be weighed carefully, considering both the potential for recovery and the associated upfront costs.
For clarity on the financial implications of proceeding with litigation, here is a breakdown of the collection rates based on the number of claims and other factors:
| Claims Submitted | Accounts < 1 Year | Accounts > 1 Year | Accounts < $1000 | Attorney Placed Accounts |
|---|---|---|---|---|
| 1-9 | 30% | 40% | 50% | 50% |
| 10+ | 27% | 35% | 40% | 50% |
These rates are tailored to be competitive and are contingent on the age of the account, the amount due, and whether the claim has been placed with an attorney. It is important to review these rates and consider how they align with your collection strategy and financial objectives.
Frequently Asked Questions
What is the recovery system for unpaid invoices?
The recovery system for unpaid invoices consists of three phases: Phase One, Phase Two, and Phase Three. Each phase involves specific actions to recover the company funds from debtors.
How long does Phase One last?
Phase One lasts for 30 to 60 days. During this time, the collector will make daily attempts to contact the debtors and resolve the account. If all attempts fail, the case will proceed to Phase Two.
What happens in Phase Two?
In Phase Two, the case is immediately forwarded to one of the affiliated attorneys within the debtor’s jurisdiction. The attorney will draft letters demanding payment and attempt to contact the debtor via telephone.
What are the options in Phase Three?
In Phase Three, the recommendation may be to close the case if recovery is not likely. Alternatively, litigation may be recommended, and the client will have the option to proceed with legal action or continue standard collection activity.
What are the upfront legal costs for litigation?
The upfront legal costs for litigation include court costs, filing fees, etc. These fees typically range from $600.00 to $700.00, depending on the debtor’s jurisdiction.
What are the collection rates for unpaid invoices?
The collection rates for unpaid invoices depend on the number of claims submitted within the first week of placing the first account. Rates vary based on the age of the accounts and whether they are placed with an attorney.
