Collections are one of the economic and financial pillars of a firm. It completes the cycle of sales, production and service by assuring the return of cash invested into the cycle of sales. We define collections, in all its aspects, as a part of the cycle of sales. To materialise profit, collections must be performed in time and fully, under the planned budget. Collections must also preserve the customers’ relations to assure recurring sales. In other words, collections are a part of the ‘customer experience’ within the business strategy of the firm.
To properly perform his job, the collector faces objective difficulties. The main difficulty is the reluctance of some customers to fully repay their debt in time (by the agreed payment terms). Some of the customers will postpone payments as much as they can, and the role of the collection department is to assure that the collections will occur as soon and as complete as possible, by existing agreements and allow the firm to optimally plan and organise its cash flow.
Another aspect of the collections is to maintain an optimal relationship with the marketing, sales, customers service and other departments and to proactively manage the impact of their work on the collections process. The cooperation between departments must be established by a common goal: materialise the expected profit. In the same time, the collections department has to avoid internal frictions by communicating its procedures properly. The collection department constantly interacts with customers and service providers like payment processors, banks, skip-tracing and collections companies and legal collections companies. To assure the proper execution of all tasks, the firm must define clear collections policy and procedures, implemented across all firm’s departments.
Next:
The collections department – mission, strategy, goals, policy and procedures
The collections department – structure, responsibilities and authority