Commercial Collection Services

Referral to Debt Collection Specialists

When the credit department loses effective contact with the debtor, it is time to refer the account to a commercial
collection service.  If the debtor has ignored requests or has broken payment arrangements, continued internal efforts may not be worth additional time.  They will cost your firm money.

Of course, referral should be made in accordance with the company’s aging policy unless special circumstances arise.  Being responsible for the principal’s assets, the credit manager will have set up internal controls that will account for a high percentage of receivables. But the small remaining percentage should be placed with a specialist a professional commercial collection service.

This option provides many advantages for the credit manager:

  • A collection service has special procedures and a position as a third party that commands attention from a debtor.
  • It provides efficient and immediate collection contact and advises at once if peremptory salvage action is required.
  • It is persistent and assertive in obtaining prompt action for its clients. and other communications. By using a collection service, more time can be given to internal credit controls and, in the long run, fewer accounts will be allowed to reach severance status.
  • Experienced credit and financial people are aware of the value of a collection service in maintaining the continuity begun in their internal control system.
  • They know that delinquent accounts are not always “bad.” But contact time, cost of money outstanding and pressure from new accounts for collection indicate to them that professional assistance is a practical consideration.

The Role of the Commercial Collection Attorney

The commercial attorney also has a role in the collection procedure. When it is determined that an account cannot be collected by collection service procedures, an attorney may be retained. Most commercial collection agencies have effective contacts for placement of claims with commercial attorneys.

Exchange of business between collection services and attorneys guarantees informed attention for the credit grantor wherever the debtor is located. If suit is justified, it will often be recommended that the claimant advance the necessary costs and provide the backup paperwork.

  • A collection service has strong psychological advantage. The debtor is no longer dealing directly with the seller.  They are dealing with a third party whose sole function is to collect this account. The debtor knows this, and they know that all legal means of collection will be used.
  • A collection service allows the credit department’s time to be used more productively. It is estimated that 5 percent of delinquent accounts take at least 20 percent of the credit department’s time. This time is consumed by letters, follow-up notes, telephone calls


This series of articles come from a fantastic publication published by the IACC  (International Association of Credit Collectors).   It is well grounded and fundamental advise that should be ready by any professional involved in credit collections.

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