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Collection Management

Collection Management is the other side of the Credit Management coin. Whatever money has been extended on credit must be collected. The first decision is to determine the basic credit and collection philosophy as follows:

1. Liberal credit, conservative collections.
2. Moderate credit, moderate collections.
3. Conservative credit, liberal collections.

Generally all credit departments must establish policies for these issues:

1. Types of contact with customers.
2. When contact should be made.
3. How will customer's past due condition effect current orders.
4. Stages of collection.
5. Collection on secured versus unsecured credit transactions.
6. Collection against liens & bonds
7. Use of the courts, outside attorneys or collection agencies.
8. Bad debt write off.
9. Reserves for bad debt.

An organization must be established to handle all of the collection requirements.

1. Staffing requirements, responsibilities and duties.
2. Chain of command and lines of authority.
3. Sales & Operations responsibility with collection issues.