Collection Policies and Procedures

Collection policies- As has been pointed out time and again in every business entity which is engaged
in the grant of credit granting credit is only one phase of its major activity.

TYPES OF DEBTORS

While all debtor who are unable to pay their obligations on time may all be lumped up under the
broad class of delinquents, nevertheless they may be further classified and distinguished according to
the attitudes and behaviour they manifest and display.

 The Cooperative debtor

-Some debtors become delinquent not necessarily out of their own making nor to their liking. In
some instances such is brought about by circumstances beyond their own control

 The chronic complainer

- it is not uncommon for creditors to be the recipients of repeated but nevertheless baseless
complains from debtors for this or that grievance which are generally the product of their fertile
imagination

 The politician type

-this type of debtor does not deny the existence of his obligation which arose from previous
transaction of hos. Neither does he shun away from the presence of bill collectors.

 The uncooperative and indifferent debtor

-this type of debtor does not pay on time, not because he cannot pay but rather because he finds
it difficult to part with his money.

 The paranoiac

- some people feel on the top of the world even when their world is crumbling to pieces. They
suffer from delusions of grandeur. Psychologist call them as the paranoid.

 The Belligerent or pugnacious type

- just as there are individuals who think that society owes them a living, so it is equally true that
there are those who think they are entitled to the use of the credit regardless of their poor credit
standing.

 The elusive type

-some debtors are as elusive as eel. It is hard to find them in their offices or in their homes.
Paying habits
 Prompt payors

-this group consist of individuals and business entities that are conscious of their financial
obligations which they discharge promptly without the need of being reminded about them.

FAIR CREDIT

a. Careless borrower - merely needs reminding regularly.

b. Complainer - he has grievances after he falls behind.

c. Unforeseen – unemployment shrunk en income, medical expenses.

SLOW CREDIT

a. Poor manager of his finances, over-indebted.

b. Martial problems - may quit hits job, skip, or hit the bottle.

c. Coward – afraid to face the creditors.

NO GOOD CREDIT

a. Lives beyond his income. Credit passed unknown.

b. Gypsy - in residence or employment.

c. crook – directly attempting to defraud.

COLLECTION PROCEDURES

 It is utterly meaningless. If not senseless, to classify accounts of

costumer without any valid purpose or philosophy behind, such as
for instance, “honest” or “dishonest” or as “prompt payor” or “slow
payor” and the like. Rather, such a classification is intended to help
the company formulate collection procedures for each category, as
well as a guide for future courses of action when to refuse further
accommodation or grant extension of credit.
  The Collection Function.

 Proper management of the investment in receivables implies the

existence of a collection function. Collection work is at times, done
directly by the credit department. At times, by an independent
agency which offers and renders collection service for a fee.

THE COLLECTION DEPARTMENT

To say that collection is a major and important activity of any credit-

granting concern is to elaborate on the obvious. In fact, so important is it
that the success of the credit-granting concern hinges, by and large, on the
efficient functioning of its collection machinery. Collection is really a part
of the credit function although it should be placed in the charge of a
separate individual or subordinate division.

Qualities of a Good bill collector

Just as the manager of a collection department is competent and capable,

so must the men under his charge be those who possess certain desirable
qualities to be assets to their department in particular and to the company
in general.

1. Industry – While industry alone does not guarantee the success of man in
his undertaking, nevertheless, it brings commensurate rewards.

2. Persistence – Persistence is the twin brother of industry. A good bill

collector is never tired and afraid of making repeat calls until the amount
owned by the debtor is turned over to the company.

3. tact – The job of a bill collector is both taxing and at the same time a
thankless one. To succeed, one must as much as possible avoid offending
the delinquent debtor while making the collection for the company, if this is
possible Thus. He should possess tact – prudence and good judgment.
4. Resourcefulness – Good bill collectors have demonstrated quite aptly why
they are a success in their chosen occupation. Possessing many desirable
qualities, one thing basic to their success is their resourcefulness. This may
be considered as synonymous with need for for achievement. Or the so-
called nACH, for short.

THE COLLECTION SYSTEM

 While it is to be admitted that no single collection system can exactly

fit the needs of every kind of business, nevertheless, one that is
expressly geared to the business enterprise that is flexible and
changing as needs arise should be devised and installed.

COLLECTING DELINQUENT ACCOUNTS

 Notwithstanding the extreme care adopted in the grant of credit,

there are occasions when some borrowers get into financial trouble
and thus find it difficult, if not impossible, to discharge their
obligations.

Collection Department Procedures

1. Not all customers pay their bills without asked to do so. This is the
rationale for the existence of a collecting arm.

2. The primordial responsibility of every collecting department is to

bring in the money owed the company with least cost and efforts.

3. It is imperative as well as sound practice to bill customers as soon as

their obligation become due.

4. .Collection efforts should be always in time with company policy

pegging down collection cost with in reasonable limits preserving good
will of customers and minimizing risk.
 5. In very subtle and tactful manner, the collection department should be
able to show the customers that is to their advantage to pay their
obligation to the company and thus avoid the attendant
embarrassment of court suit and impaired reputation.

6. Collection letters should be worded in a personal fashion and make

customers feel that they are important and moreover friends of the
company with whom they transact business.

7. Every collection effort should be properly recorded in the credit file so

that a complete history is available at all times and moreover kept up
to date.

8. 8. The collection department should periodically review its policies

and procedures, and evaluate against results.

Who could be of help??

When customers are have a disabilities collectors can settle their obligation
one method that sometimes prove to be helpful is by contacting the wife
over the telephone and appeal to her.

Benefits from effective collection effort

1.Reduction in the volume of accounts receivables.

2. Freeing capital for carrying the business operation.

3.Increasing profits through decreased expenses.

4. Shortening of credit period

5.Establishing a line of customers who are financially sound.

Seven elements of collection Policy

1.Collection is made easier, when the credit extended is a package of three

things, credit, supplies and knowledge.

2.Another major element of a viable collection program for rural credit is

“timing” the farmer operates within a critical season of constraint and
timing for him is very crucial.

3. Be selective in your clientele. In many cases the old concept of extending

credit is based on worth ,assets etc. perhaps the most assured method of
collection.

4.Employ well-trained credit technicians.

5.Maintain a continuity of the human relationship once established.

6. Tell the story of your bank to your community at every opportunity.

7. The final element of a sound collection policy, if the other six have failed
is to admit you have a collection problem in your hands.

Collection Letters

are beyond question the most difficult to the writer. In fact failure on the
part of the writer to prevent offending the customer cause more harm than
good.

Fundamental principles of collection letter

Most people are sensitive about their financial affairs and this includes
perhaps you and me and many of us. In fact not in frequently, most of them
if not all, try to hide behind a cloak of embarrassed silence. A number of
them in their moment of anxiety, if no weakness do make certain promises
which they know quite well are difficult to fulfill.
Importance of Collection Letters

1. To collect the money due to the company.

2. To keep and retain good will of the customer

Qualities of a good collection letter

1. It should be short and direct.

2. It should use dated action.

3.It should be written from the customers viewpoint.

4.It should not provide any cause or occasion to arouse the anger and
bitterness of the customer.

5. It should be revised periodically.

6.It should have a humanistic approach.

7. It should follow a definite pattern.

8. It should be written in such a way as to make it appear as if it were the

last to be sent to debtor.

Types of collection Letter

1. Reminder letter in cases where a creditor is forced to bring to the attend

of a debtor about his existing obligations to the company, the presumption
is that owing to the busy world of debtor.

2.Follow up letters when one or tow reminders fail to bring any response
from the debtor collection letters which are still friendly, but nevertheless
firmer tone, should be sent.
3. The discussion Letter when the customer chooses to ignore the reminder
letter the stage is ripe for the next step is to find out from the customer the
reason why he has not taken any action on his existing obligation.

4.The appeal letter not infrequently there are times when a company may
decide to forego send a discussion letter to its customer and instead
proceed to of from the reminder letter to sending an appeal letter when
such is the case the letter has the characteristics of both discussion letter
and appeal letter.

5.The Demand letter when reminders follow ups and appeal letter fail to
produce the desirable results the creditor is made to realize that he has a
problem in his hands. He cannot collect the account simply through the use
of collection letters short of any drastic action.

Effective techniques

Registered letters when a delinquent pays no attention to letters and is not

accessible to personal calls the collector may occasionally use the registered
letter to good effect. The creditor may call attention to the fact that such
other letters have no been answered.

Collection through the use of drafts use draft in enforcing the settlement of
an obligation such instrument is commonly used by wholesalers and
manufacturers.it is represent one of the more urgent steps in the collection
series.

Bad Debts

As borne by experience on the part of many business man notwithstanding

measure and efforts to collect accounts receivable not in frequently there
are occasions wherein debts could not be collected for one reason.
Influencing an authorized official of the company

1. The debtor customer has become declared insolvent.

2. Inspite of diligent efforts as well as exhaustive remedies the customer

has stubbornly refused to send. any reply or action

3. The inability to locate the whereabouts of the debtor notwithstanding

diligent effort and the of means at the command of the creditor
company.

4. The business has ceased operation for several years.

Group 6

Submitted by: Butulan

Dagalangit
Jimenez
Josue
Pacaldo