Collections vs. Follow-Up – What Restoration Contractors Really Need

Here’s a scenario that plays out in restoration companies daily:

You completed a $35,000 water damage restoration six weeks ago. The work was perfect. The customer is thrilled. The insurance company acknowledged your claim submission.

And then… nothing.

You’re wondering: “Do I need collections? Should I keep following up? How long do I wait before taking action?”

Most restoration contractors conflate two completely different processes: collections and follow-up. They’re not the same thing, they don’t solve the same problems, and using the wrong one costs you time and money.

Let’s clarify what you actually need.

What Follow-Up Actually Is (And Why It Matters More)

Follow-up is the systematic process of moving active claims through the insurance payment pipeline.

Think of it like air traffic control. Your claim is in the system, moving through various checkpoints. Follow-up ensures it keeps moving and doesn’t get stuck in holding patterns.

What follow-up involves:

• Confirming claim receipt and assignment
• Checking processing status at regular intervals
• Responding to information requests immediately
• Proactively providing additional documentation
• Escalating appropriately when timelines are missed
• Building relationships with adjusters
• Navigating internal insurance company processes

When follow-up is needed:

• Claims submitted but not yet paid (active claims)
• Supplements pending review
• Information requested by adjuster
• Payment approved but not yet issued
• Any claim in the active processing pipeline

What follow-up is NOT:

• Aggressive or adversarial
• Debt collection
• Legal action
• Dealing with customers who won’t pay
• Handling disputed or denied claims (that’s appeals)

The key insight: Most restoration contractors think they need collections when they actually need better follow-up systems.

What Collections Actually Is (And When You Need It)

Collections is the process of recovering money owed after the normal payment process has failed or been exhausted.

Collections involves significantly different strategies, legal considerations, and relationship dynamics than follow-up.

What collections involves:

• Demand letters and formal notices
• Payment plan negotiations
• Lien filings (when applicable)
• Credit reporting
• Collection agency engagement
• Small claims court
• Attorney involvement
• Legal judgments and garnishment

When collections is actually needed:

• Customer owes you directly and refuses to pay
• Insurance company denied coverage and customer is responsible
• Customer received insurance payment but didn’t pay you
• Claims that have been formally denied (after appeals exhausted)
• Accounts 120+ days past due with no resolution path
• Bad faith situations (rare but they happen)

What makes collections different:

• Adversarial relationship (you’re forcing payment)
• Legal framework and compliance requirements (FDCPA, etc.)
• Potential for credit damage to debtor
• Costs money (collection fees, legal fees)
• Damages business relationships permanently
• Success rates vary widely (30-50% recovery is common)

The critical distinction: Collections is a last resort for failed relationships. Follow-up is active management of working relationships.

Why Most Restoration Contractors Misdiagnose the Problem

You think you need collections when:

• 60 days have passed since submission
• Adjuster isn’t responding quickly
• You’re frustrated with the process
• You need the money urgently

What you actually need:

• Strategic follow-up system
• Better initial documentation
• Relationship management with adjusters
• Understanding of insurance processing timelines
• Escalation strategies

The misdiagnosis costs you in three ways:

1. Time: Collections processes take longer than effective follow-up would have
2. Money: Collection agencies take 25-50% of recovered amounts. Attorney fees can exceed that. Effective follow-up costs a fraction.
3. Relationships: Once you go to collections, that relationship is burned. With follow-up, you maintain working relationships for future claims.

The Follow-Up System That Actually Gets Results

If 90% of delayed payments can be resolved with proper follow-up, why do restoration contractors skip straight to collections thinking?

Because they don’t have follow-up systems.

Here’s the framework that actually works:

Phase 1: Prevention (Days 0-7)

The best follow-up happens before problems start.

• Submit complete, adjuster-ready claims
• Confirmation email within 24 hours listing all included documentation
• Day 3: Friendly check-in confirming receipt
• Day 7: Status inquiry if no initial response

Goal: Establish communication pattern and catch problems early.

Phase 2: Active Management (Days 8-30)

Most claims process in this window. Your job is keeping momentum.

• Day 10: Detailed status check with specific questions
• Day 14: If no substantive response, escalate to supervisor
• Day 21: Confirm payment processing timeline
• Day 28: Pre-payment follow-up confirming all requirements met

Communication strategy:

• Professional but persistent
• Specific questions, not vague “checking in”
• Document all interactions
• Build adjuster relationship, don’t antagonize

Phase 3: Strategic Escalation (Days 31-60)

If you’re past 30 days, something’s stuck. Escalation is required.

• Day 31: Supervisor escalation with documented timeline
• Day 40: Claim resolution department involvement
• Day 50: Policyholder notification of delay
• Day 60: Department of Insurance inquiry (if warranted)

When to involve the policyholder: The customer has contractual rights with their insurance company. Sometimes policyholder pressure moves claims faster than contractor pressure.

What to say: “We submitted your claim on [date]. The insurance company hasn’t processed payment yet. As the policyholder, you may want to contact your adjuster directly to inquire about the delay.”

Phase 4: Determination (Days 61+)

Past 60 days, you need to determine if this is still a follow-up situation or has become a collections situation.

Questions to answer:

• Is the claim still actively being reviewed, or has it been denied?
• Is the delay bureaucratic or adversarial?
• Is the adjuster responsive or ghosting?
• Has the customer fulfilled their obligations?
• Is there a path to approval, or is this dead?

Decision point: Continue follow-up if there’s a clear path forward. Switch to collections if the relationship has broken down or claim is formally denied with no appeal options.

The Collections Reality Check

Before you pursue collections, ask these hard questions:

1. Is the debt actually collectible?

• Does the debtor have assets or income?
• Is the amount large enough to justify collection costs?
• Can you legally collect (lien rights, jurisdiction, etc.)?

2. What will it cost?

• Collection agency: 25-50% of recovered amount
• Attorney: $200-$500/hour or contingency
• Filing fees, court costs, service of process
• Your time managing the process

3. What are your chances?

• Collection rates average 30-50% for commercial debt
• Many claims are ultimately uncollectible
• Even winning judgments doesn’t guarantee payment

4. Is it worth burning the relationship?

• Will you work with this insurance company again?
• Is this a customer’s insurer who might refer others?
• Is the adjuster someone you’ll encounter on future claims?

The math: A $10,000 claim going to collections might cost you:

• 35% collection fee: $3,500
• Your time: 10-20 hours @ $150/hour value: $1,500-$3,000
• Relationship damage: Immeasurable but real

Net recovery after costs: $3,500-$5,000 on a $10,000 claim (if successful)

Compare that to: Effective follow-up costing a few hours of time and typically recovering the full amount.

When Collections Is the Right Answer

Collections makes sense in these specific scenarios:

Scenario 1: Customer Non-Payment After Insurance Settlement

• Customer received insurance check
• Customer refuses to pay you from settlement
• Clear contractual obligation
• Action: Demand letter → Lien filing → Collections/Legal

Scenario 2: Denied Claims with Customer Responsibility

• Claim denied for coverage reasons
• Customer contractually responsible for payment
• Customer refuses to pay
• Action: Payment plan negotiation → Demand letter → Collections

Scenario 3: Repeatedly Ghosted Customers

• Work completed months ago
• Multiple collection attempts unsuccessful
• No response to communications
• Action: Final demand letter → Collections agency

Scenario 4: Bad Faith Insurance Situations

• Clear coverage, unreasonable denial
• Appeals process exhausted
• Customer assigns rights for bad faith claim
• Action: Attorney involvement for bad faith pursuit

The commonality: The normal process has conclusively failed and adversarial action is the only path forward.

The Hybrid Approach: Professional Claims Management

Here’s what the smartest restoration contractors have figured out:

The optimal solution isn’t choosing between follow-up and collections—it’s having professionals who know exactly which tool to use when.

What professional claims management provides:

Expert Follow-Up:

• Systematic tracking of all claims
• Strategic timing of communications
• Relationship management with adjusters
• Escalation expertise
• Insurance company process knowledge

Collections When Necessary:

• Knowing when to switch from follow-up to collections
• Pre-collections strategies (demand letters, negotiation)
• Connections with specialized collection agencies
• Legal resource coordination when required

The key differentiator: Experience and judgment. Knowing when to be patient, when to escalate, when to negotiate, and when to pursue collections.

The Workflow Most Contractors Need

Stop trying to be your own collections department. Start managing claims professionally:

For Active Claims (0-60 days):

• Systematic follow-up process
• Documentation and tracking
• Relationship management
• Strategic escalation

For Stalled Claims (60-90 days):

• Intensive escalation
• Policyholder involvement
• Insurance department inquiry
• Supervisor/executive escalation

For Failed Claims (90+ days):

• Determination meeting: Continue or pivot?
• Pre-collections demand process
• Collections agency engagement (if appropriate)
• Legal consultation for large claims

Stop Confusing Activity With Progress

Most restoration contractors don’t have a collections problem. They have a follow-up problem disguised as a collections problem.

The solution isn’t more aggressive collection tactics. It’s better claim management systems.

Ask yourself:

• Do you have a systematic follow-up process for every claim?
• Are you tracking claim status, communications, and deadlines?
• Do you know when to escalate and how to escalate effectively?
• Are you building relationships with adjusters or alienating them?
• Are you documenting everything for potential escalation?

If the answer to any of these is “no,” you don’t need collections—you need better follow-up systems.

Get Professional Claims Management (Not Collections)

Smart Claims™ isn’t a collections agency—we’re claims management specialists. We know the difference between a claim that needs strategic follow-up and one that’s truly uncollectible.

Our team systematically manages every claim through the insurance process, escalates appropriately when needed, and yes—pursues collections when it’s actually the right strategy.

But 95% of the time? Proper follow-up gets the job done faster, cheaper, and without burning relationships.

Need this done for you? Stop guessing whether you need follow-up or collections. Submit your claim to Smart Claims™ and let professionals determine the right strategy for maximum recovery.