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The age of a receivable is the number one determining factor if the receivable will pay, and how quickly the receivable will pay. In other words, the rates in which accounts are collected are determined mostly by the company placing the accounts rather than who the accounts are being placed with. At Debt Recovery Resources, we provide our clients with individualized, cost-effective collection solutions.

Let’s take a moment to ponder why aged receivable have a lower rate of recovery. The central reason accounts are delinquent is simple. Cash flow issues. The company’s that owe are typically having financial problems. There simply isn’t enough money to pay a business that will not monetarily benefit the other business. If the vendor acts fast, there is a better chance to recover the money owed AND have the debtor request more product or service in the future. This in turn generates more revenue. So if age is the number one determining factor if an account will pay; then age should be the number one factor in determining which accounts should be placed for collections.

As that account ages, the likelihood of the company’s financial situation improving are rare. According to the SBA, small business’s make up over 99% of U.S. employer firms and according to the Census Bureau roughly 600,000 businesses are closed each year. That is roughly 10% of all business. So in many cases, nonpayment is due to a business closing or filing bankruptcy. Unfortunate, for unsecured vendors and some secured vendors, when a receivable reaches this point, there is no way to recover the money. In many cases debtors are more protected than creditors. We find that about 10% of aged accounts are out of business or bankrupt. Well what about the other 90%? Not all aged accounts go unpaid.

So, if an account is still in business, why non-payment? That’s the million dollar question. Each account is unique in its own way. In some instances the invoices are being disputed, but MOST disputes are a cover-up for a cash flow problem. The debtor feels that if it passes the blame to the vendor maybe they can get themselves out of the debt at a lessor amount, or not pay all together. Progressive commercial debt collectors use resources to help build financial profiles on debtors when they are placed for collections. It is necessary for a commercial agency to gain a full understanding of the debtor’s financial picture before starting their collection efforts. In some cases, debt collectors allow their clients access to these resources when new clients come to them looking for credit. Most businesses understand background checks can be a vital tool when determining what businesses are credit-worthy.

If your business provides unsecured net terms for service or product, it is absolutely necessary to protect yourself at all cost. As an unsecured creditor, you have no collateral and your options are limited if your client default on their credit terms. Some businesses do not use these methods for a number a reasons. Signing up with a provider of these types of service can be costly. We recommend finding a commercial debt collectors that provide these services for free. In some cases business don’t want to know in fear it may cost them the business.

Provding our clients with individualized, cost-effective collection solutions.

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