What is Collections?
Collections Departments, or agencies, ensure that delinquent accounts are reconciled and paid in a timely, cost-effective manner. Companies must balance direct credit losses and the costs of debt recovery judiciously. Most companies are willing to allow small debts to lapse if the cost of recovery starts to exceed the amount being collected. Doing so allows companies to devote considerable time and energy to the collection of larger debts. Typically, collections agencies follow an escalation method based on the number of days the account has been delinquent and the amount owed. At a certain point however, typically when a debt is 90-120 or more days past due, companies will enlist the help of a third party collection agency to collect past due account balances, or charge the debt off entirely.
A typical collections function is composed of several common sub-functions, or teams, that work together to monitor and collect on delinquent customer accounts. Employees within the Collections Group are also responsible for working with debtors to mitigate defaults (typically through deferments and forbearance) and ensuring that all collection activities are in compliance with internal and external regulations. Browse our Collections organization chart page to learn about the roles and responsibilities of each major function. Then, download our org chart template (PDF, Visio, PPT) to plan and support collections operations improvement efforts.
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Check out our collections best practices page to view selected descriptions of work methods that have been proven to produce better results (as compared to other, similar methods). Want more? Download our collections best practices guide, which provides a healthy selection of valuable best practices that can be incorporated to improve collections operations. There might not be only one "best" way to perform every task. However, there is always a "better" way.