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©2024 by Shepherd Outsourcing.
Unpaid invoices and lingering receivables are a hidden crisis for many U.S. businesses. A recent Intuit QuickBooks survey of U.S. small businesses found that 56% are owed money from late payments, with the average small business holding around $17,500 in outstanding invoices.
For small and mid-sized businesses, unpaid invoices don’t just slow things down; they put pressure on cash flow, delay payroll, and stall plans for growth.
You might’ve already sent reminders, extended deadlines, or given the benefit of the doubt. But the weeks drag on, and the payment still doesn’t come through.
In this blog, you’ll find practical steps to manage and recover unpaid debt, from early warning signs to legal recovery and working with professionals when needed. If overdue payments are piling up, this is the place to start.
Before attempting to collect, it is helpful to understand the type of debt you’re dealing with and its current position in the recovery timeline. Not all unpaid balances follow the same path, and treating them the same way can waste time and effort.
Each of these may involve different risk levels, collection timeframes, and legal processes.
Most debts go through these stages:
Once a debt crosses 90 days, the chance of full recovery drops sharply.
Expect recovery chances to shrink rapidly once an account crosses 60 days, and drop precipitously past 180 days.
That’s why the earlier you intervene, the better your chances; especially when simple actions can prevent debts from slipping too far.
Once an invoice goes unpaid, time is your most valuable asset. The first 30-60 days are critical, and without a structured follow-up, delays, not refusals, are what often lead to lost revenue.
Early-stage management isn’t just about collecting; it’s about setting a tone of clarity and accountability from the very beginning.
However, when the reminders stop working and the payment still hasn’t arrived, a different strategy becomes necessary.
When payments stretch beyond 60 days despite repeated reminders, it usually signals a deeper issue that needs a considered response. Jumping to legal action isn’t always the answer. Often, you can still recover the money with clear, structured communication.
When debt starts dragging past the 90-day mark, handling it in-house becomes more challenging. This is often when businesses consider third-party help, but the key is choosing the right kind of support.
That’s where professional recovery services come in, especially when internal efforts are draining resources with little return on investment.
If an invoice has gone unpaid for over 90 days and your internal efforts haven’t worked, it may be time to bring in a third party. Debt collection agencies specialise in recovering funds without tying up your team or damaging business relationships.
Most work on a contingency basis, charging only when they collect, typically taking 20% to 50% of the recovered amount. The best agencies adhere to federal laws, such as the Fair Debt Collection Practices Act (FDCPA), ensuring that recovery efforts remain professional and compliant.
Shepherd Outsourcing Services works with businesses at this stage to step in, manage negotiations, and offer repayment solutions when in-house follow-ups have stalled.
Still, not every overdue account is recoverable. Therefore, it's equally important to understand how to handle write-offs, tax implications, and legal next steps.
When all attempts at recovery fail, even after outsourcing, some debts move into the legal or write-off stage. While this isn’t ideal, it’s necessary to protect your financial records and explore final options for resolution.
If the amount owed is substantial and well-documented, pursuing legal action may be a viable option. This could involve sending a formal demand letter, filing a small claims case, or seeking a court judgment. Keep in mind that the statute of limitations varies by state, so timing is crucial.
For debts that are no longer collectible, writing them off helps keep your books accurate. In most cases, written-off debt can be claimed as a business loss, but documentation is key. The IRS outlines specific rules for this under Section 166 of the Internal Revenue Code.
If you recover a previously written-off balance, it must be recorded as income in the year it's received. This is referred to as bad debt recovery, and it has tax implications that you’ll want to prepare for.
At this stage, clarity in documentation and accounting matters just as much as the recovery itself, especially when it impacts year-end financials and tax filings.
That’s why having systems that track these outcomes and tools that help you spot risk earlier can make future debt recovery more predictable.
With the right tools and reporting practices, you can catch problems early and make better decisions about credit, follow-ups, and escalations. Read these best practices below.
Use invoicing tools that send automatic reminders, track payment status, and flag overdue accounts. This saves time and ensures no account slips through the cracks.
Regularly review your accounts receivable aging report to monitor trends and spot risk early. Group customers by payment behavior to tailor your communication strategy.
These numbers help you evaluate what’s working and when it might be time to adjust your credit terms, follow-up cadence, or collection partners.
If you're looking to strengthen your internal process while keeping collection efforts professional and compliant, Shepherd Outsourcing Services offers tailored support, whether it’s early intervention or managing recovery on your behalf.
Unpaid debt is uncertainty added to your daily operations. But with the right approach, from early action to professional recovery support, you can take control of your receivables and protect your business from prolonged financial gaps.
Whether you're managing a handful of late invoices or reviewing long-overdue accounts, every stage of the process counts. And when internal efforts stall, outsourcing experts at Shepherd Outsourcing Services can make all the difference.
Ready to plug the leak and restore steady cash flow? Reach out today for a consultation and discover how our tailored approach can turn overdue accounts into closed chapters.
A: Recovery rates drop with time. Within 90 days, you might recover 30–50%. Beyond 180 days, it can fall below 10%.
A: Legal action may be worth it for high-value, well-documented debt. But it's costly and time-sensitive due to statutes of limitation.
A: A debt becomes “bad” when it’s unlikely to be collected. Businesses can write it off and may report it as a loss.
A: Set clear credit terms, invoice promptly, monitor aging reports, and use automated payment reminders.
A: No explicit consent is needed, but messages must follow fair communication practices, especially under the FDCPA if escalated.
©2024 by Shepherd Outsourcing.