Who is responsible for credit and collection in a company?
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What is the Procedure for Collections?The collections staff may deal with an enormous number of overdue invoices. If so, the collection manager needs a procedure for dealing with customers in a standardized manner to resolve payment issues. The detailed collection procedure is listed below. The process flow noted here only generally represents the stages of interaction with a customer. These steps might be shuffled, supplemented, or eliminated, depending on the payment status of each invoice. The steps are noted below. Step 1. Assign Overdue Invoices (optional)When an invoice becomes overdue for payment, assign it to a collections clerk for collection activities. Step 2. Verify Allowed Deductions (optional)A customer may submit a form detailing a deduction claim under the company’s marketing plan. If so, verify the claim with the marketing manager and match it against deductions taken by the customer. If a deduction can be traced to the allowed deduction, submit a credit memo approval form to offset the amount of the deduction. Step 3. Issue Dunning LettersUse the accounting software to print dunning letters at fixed intervals, with each one pointing out overdue invoices to customers. Review the letters and extract any for which other collection activities are already in progress. Mail or email the other dunning letters to customers. Step 4. Initiate Direct ContactIf there are still overdue invoices outstanding, call customers to discuss the reasons for lack of payment. Following each call, record the details of the call, including the date, person contacted, reasons given for late payment, and promises to pay. Step 5. Settle Payment Arrangements (optional)If it is necessary to accept a longer payment period, document the terms of the payments to be made, as well as any interest to be paid and any personal guarantees of payment. Step 6. Adjust Credit Limit (optional)At this point, the collections staff should have sufficient information about the financial condition of a customer to recommend to the credit staff if a reduction or termination of a customer’s credit limit is in order. The credit staff is responsible for changing a credit limit – the collections staff only provides information. Step 7. Monitor Payments Under Settlement Arrangements (optional)If there are special payment plans, compare scheduled payment dates to the dates on which payments are actually received, and contact customers as soon as it appears that they will miss a scheduled payment date. This level of monitoring is required to keep customers from delaying their payments. Step 8. Refer to Collection AgencyOnce all other in-house collection techniques have been attempted, shift invoices to a collection agency. At this point, the customer should certainly be placed on a credit hold list. Step 9. Sue the Customer (optional)If all other alternatives have failed, meet with the company’s legal staff to determine whether the company has a sufficient case against a customer to win a judgment against it in court. Also, the customer should have sufficient assets available to pay any judgment against it. If these issues appear favorable, then authorize the legal staff to proceed with a lawsuit. Step 10. Write Off Remaining BalanceIf all collection techniques have failed, complete a credit memo approval form in the amount of the invoice(s) to be written off. Step 11. Conduct Post MortemIf there was a specific problem with the company’s systems that caused a bad debt to occur, call a meeting of those people most closely related to the problem to discuss a solution. Assign responsibility for action items, document the meeting, and schedule follow-up meetings as necessary. It is more likely that the outlined collection procedure will be used by new collections personnel. More experienced staff should be allowed to vary their activities from this list, based on their opinions regarding the best way to collect from certain customers. Credit and collections clerk job descriptionCredit and collections clerk positions are often entry-level, although many firms seek up to several years of experience. Candidates should have excellent customer service, negotiation, communication and analytical skills. An associate or bachelor’s degree in accounting or a related area is preferred. Typical duties of a credit or collections clerk
Robert Half is a leading finance temp agency. What is credit and collection in business?WHAT IS CREDIT AND COLLECTIONS MANAGEMENT (CCM)? Credit & Collections Management (CCM) is a suite of integrated business applications that extend a company's accounts receivable and accounting system to facilitate credit management, invoice dispute management, collections, and related business processes.
What is the primary responsibility of the credit and collection department?Defining Credit & Collections Goals. The primary goal for the credit and collections department is to turn open invoices into cash, therefore increasing the cash flow while mitigating credit risk.
What is the role of collection department?Collections officers are responsible for managing the collection of outstanding debts from clients and customers. They are hired by businesses and collections agencies to inform customers of their overdue bills and attempt to collect payment to mitigate company losses.
Why the credit and collection department in a business organization?The properly organized credit department plays a critical role in managing accounts receivable portfolio risk to protect profits, prevent potential losses and help the company sell more products or services.
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