Internal Collection Efforts: Best Practices The first step

As a commercial collection law group we are always asked by small business owners about the best practices for internal collection efforts. We will answer that question with a series of short articles that address things every small business should incorporate into its commercial collection activities.

The very first step any small business should do with respect to commercial collections is to set up internal collection rules in the form of a collection policy. The collection policy should include very specific action items to be implemented. For example below is an example of some of the major items that should be included in the policy.

  • Determine the acceptable time period for invoices to be paid.
  • Determine who in the organization will be responsible for collecting past due amounts.
  • Determine a mechanism for how past due accounts will be flagged for collection follow-up. This can be based on days past due, lack of communication of debtor or some other collection criteria.
  • Determine the proper protocol for how to follow-up with those accounts flagged for collection follow-up. This includes a policy on when to contact the debtor, how to contact the debtor, how often to contact the debtor and the method of contacting the debtor which can be phone calls, emails, faxes, letters or a combination of all methods.
  • Determine how long the above internal communications will continue without successful collections.
  • Once an account has been deemed not collectible internally have a policy on the type of third party collection entity the matter will be referred to if the account is viable. It is important to determine before engaging a third party collection firm if the file is actually a viable collection file. If the debtor has closed their doors or is no longer a viable going concern there is no point in sending the matter to a third party collection firm and the receivable should be written off.
  • If the file is a viable collection matter determine what type of third party collection entity the matter will be referred to: a law firm, a collection agency or a combination law firm and collection firm.
  • Once a decision is made to send a matter to a third party make sure there is an internal person who is responsible for communicating with the third party to ensure collections are being managed effectively and efficiently.
  • If the third party collection firm is not able to collect amicably within a reasonable time have a policy on when the matter will be sent to litigation and what the litigation parameters are.

In today’s economic client commercial collections need to be addressed on an ongoing basis. Utilizing a commercial collections agency like TCLG can be a great help. Otherwise, the first step to making sure internal collection are being handled properly is to have a collection policy in place because as we all know time is of the essence when it comes to collecting past due commercial accounts, because businesses are here today and gone tomorrow.

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