In Collections, He Who Hesitates Is Lost
A Game Plan for Stopping the Bleeding
When it comes to collections, time is not neutral — it is corrosive. Delays can make commercial claims more difficult or expensive to pursue, depending on documentation availability, defenses, applicable limitation periods, and the debtor’s financial condition.
The math is brutal – Commercial Collection Agencies of America has reported that once an account is 90 days past due, the probability of recovery falls to 68.9%. By six months, it drops to 51.3%. After a year, the odds fall to 21.4%.
Despite this, many clients are tempted to adopt a “wait and see” approach rather than incur hourly legal fees pursuing collection claims for which there is no guarantee of recovery. The desire to avoid pouring good money after bad is understandable. But as the above statistics strongly suggest, failure to act swiftly can also come with a significant potential cost measured in terms of diminished recoveries, making the old saying ring true: “He who hesitates is lost.”
Enter the Contingency Fee Advantage
No one can eliminate the cost risks inherent in legal collections work. However, those risks can be managed in ways a client may find more appealing than going with traditional hourly billing.
This is especially true when it comes to portfolios comprising a sufficient number of commercial collection claims. Depending, of course, on the specific nature of claims within a portfolio, an alternative fee arrangement may allow the client to manage upfront costs more effectively and align fees more closely with recovery.
A contingency fee structure ties the lawyer’s compensation directly to the client’s success. No hourly fees – indeed, no fees whatsoever unless and until money is recovered and in the door. Accordingly, there is no need for the client to spend time worrying about whether a claim is “worth” pursuing. The moment a delinquent account is identified, action can begin.
Both the client and the attorney share the same goal – to achieve the greatest recovery possible within the shortest time possible. In effect, a contingency fee arrangement is designed to transform time from an adversary into an ally.
Beyond the Single Claim: Building a Culture That Beats the Clock
True success does not come merely from chasing unpaid invoices — it comes from systematizing speed. A proactive law firm will work side by side with its clients to examine and improve their internal A/R systems so that overdue accounts are flagged immediately, documentation is airtight, and escalation happens swiftly before decay sets in. With this framework in place, the clients have a favorable opportunity to recover more while establishing an institutional rhythm that keeps future receivables healthy.
A successful A/R management system incorporates these elements:
Early Identification. Flag overdue accounts immediately after payment terms lapse.
Well-maintained Documentation. Keep all contracts, invoices, correspondence, notes, and payment records organized and accessible.
Defined Escalation Protocols. Set, and adhere to, clear timelines for when an account moves from internal collections to outside action.
Portfolio Review. Regularly analyze receivables to spot patterns and adjust procedures.
This disciplined approach helps ensure that claims are timely and effectively worked early on, thereby promoting the chances for higher overall yield and reduced write-offs.
William Penn famously observed, “Time is what we want most, but what we use worst.”
When time is properly managed – and aligned with the right fee structure – it stops being an enemy and becomes a competitive advantage.
The Takeaway
In collections, “delay equals decay.” The clock is always ticking, and hesitation can be surprisingly expensive. The contingency fee model can help address not just the cost problem but the “time problem” — by fully aligning counsel’s motivation with the client’s best interest.
This article is for general informational purposes only and does not constitute legal advice. Business law is fact-specific, and readers should consult qualified legal counsel regarding their individual circumstances.
Andrew L. Stein is a Director in Fennemore’s Business Litigation group, assisting clients in commercial credit and collections disputes. He can be reached at astein@fennemorelaw.com.
Paul R. Franke III is a trial attorney specializing in financial litigation, advising businesses on issues involving banking, real estate, corporate financing, and capital structures. He has over 30 years of experience helping clients navigate complex financial challenges with practical, effective solutions. He can be reached at pfranke@fennemorelaw.com.