Collection Department Flashcards
a term used by a business when referring to money owed to that business by a customer
Collection
When a customer does not pay the business within the terms specified, the amount of the bill becomes past due and is sometimes submitted to a _______
collection agency
The art of collection requires _____ and immense ______ on the part of the _______
tenacity, fortitude, collector
strategies, organization and procedures for recovery of receivables
Collection Program
Objectives of a collection program are:
- To reduce the amount of bad debt losses while controlling collection costs
- To reduce the company’s investment in accounts receivable
Responsible for monitoring and following up on receivables.
Collection Department
Types of Debtors according to paying habits
Prompt Payers
Delinquent Debtors
Pays their financial obligations on time without the need for their creditor’s reminders.
Prompt Payers
Individuals or firms who are unable to pay their financial obligations within the agreed time.
Delinquent debtors
occurs as soon as the debtor misses a payment on a loan, which can affect their credit score.
Delinquency
Kinds of Delinquent Debtors
- The Negligent
- The honest but confused
- The can’t be bothered
- Seasonal Delinquent
- Honest Late Payer
- Chronically Slow
- Twittingly Late
- The stretcher (Plastic Man)
- Habitual Discounter
- The tightrope walker
- The Braggart (Mayabang)
- The Vanishing (Houdini) Debtor
When an invoice is a month overdue
follow up with reminders to collect payment
After 60 days of invoice
a company needs to escalate the overdue invoice and the chances of it being paid have now significantly decreased.
After three months, an invoice is considered to be in severe delinquency.
Companies may take legal action to pursue payment or consider turning to a debt collection agency.
An invoice that has not been paid four months after the due date is the most severe level of delinquency.
Escalation should include a warning that once legal action is pursued, the delinquency is part of the customer’s credit report and updated in the databases of third-party credit report services.
Causes of Delinquency
- Financial Difficulties
- Disputes
- Creditworthiness
- Communication
- Unsystematic Collection Effort
- Cash Flow Management
a written notification to a customer or debtor who has not yet paid an outstanding invoice.
Notice or Reminder
A reminder should be ____, _______, and _____ to the point.
short, digestible, direct
Reminder must be written in a way that the message of the collection is ________ by the debtors.
clearly understood
The notice or reminder, to be effective, must be also designed with ______.
novelty
The color of the notice must be ______
colorful
It must contain an ______ object that can ______, _______, and ______ the debtor to react positively
eye-catching, motivate, command, prompt
It must be in _____ size
proper
used as a collection tool, reminding customers of the amounts they owe to the issuer.
Statement of Account
possess the respect of both the creditor and debtor, which can be established through their reputation as an __________ or ____________.
experienced attorney, reputable collection agency
a tool used for debt collection and are typically written by a collection agency or an attorney on behalf of a creditor.
Third Party Letters
can provide legal expertise and a proven track record in debt collection matters, which can inspire trust and confidence in both parties.
experienced attorney
with a solid reputation for fair and professional practices can command respect.
Reputable Collection Agency
prohibits financing and lending companies (along with their third-party service providers) from engaging in abusive practices such as harassment, threats, misrepresentation, and unfair communication methods.
Securities and Exchange Commission (SEC) Memorandum Circular No. 18 Series of 2019
process of managing and collecting payments due on outstanding debts by sending text messages. This is becoming increasingly popular as it allows debtors and creditors to communicate directly
Telegrams/ Cables/SMS (Text Collection)
The art of preventing the occurrence of, and bringing about prompt and satisfactory conclusion to problem account situations
Remedial Account Management
Strategies and activities that compromise an overall rehabilitation plan to help the client meet its maturing obligations and improve lender’s chances of recovery
Remedial Measures
Any change in the principal terms and conditions of the loan in accordance with a restructuring agreement setting forth a new plan of payment on a periodic basis
Loan Restructuring
Covers lump sum payment either through cash payment and generally includes penalty changes
Compromise Settlement
Involves the provision by the borrower of services and/or goods as loan settlement
Off-setting/Linkage
Involves the securing of additional collateral to secure the loan and/or continuing Guaranty and/or JSS by a more viable and/or acceptable party as further security of the loan
Strengthen Collateral Credit Position
Involves the assumption of mortgage by a third party
Assumption of Mortgage
Procedure by which mortgaged property is sold upon default of a mortgage in satisfaction of mortgage debt
Foreclosure
It is an integral part of a total system for managing the credit portfolio.
Credit Review
2 Major Credit Aspects
- Portfolio Quality
- Process Quality
This is principally evaluated using a
quantitative assessment of the
portfolio mix and past due rate
Portfolio Quality
This is an assessment of the
procedures in the marketing and
administration of accounts based on
established credit policies and
procedures.
Process Quality
Categories of Process Quality
- Target Market
- Credit and Initiation Analysis
- Loan Documentation and Disbursement
- Credit Administration and Documents Management
- Problem Recognition
This aspect of the review
establishes the
appropriateness of the
organizational set-up in
terms of staff adequacy,
work experience, delineation
of functions, account
assignment, among others
Organization and Deployment
The review determines the
availability and effectiveness
of training programs and
other coaching tools in the
delivery of functions.
Coaching and Training
This is an evaluation of
the processes in the
administration of
problem accounts. The
review deals basically
on the credit monitoring
and supervision
activities, anticipation
and recognition of problem
Normal Management
Major Aspects of Loan Recovery
- Remedial Management
- Normal Management
