Importance of the collection area in your business finances

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When a business implements credit sales (whether of products or services) it is important to develop both a credit area and a collection area . But why? In the first case, a credit area will be in charge of validating the clients' background to decide whether or not to grant them credit; while the collection area will be in charge of monitoring the payments of said clients to ensure that they comply with them on time or take measures in case they fall into arrears.

Since the credit and collection areas are closely related, companies often choose to form a single unit; however, it should be noted that their functions, as well as the tools they use, are different.

In this post we want to tell you why a collections area , separate from the credit area, is a good idea; and in the same way, why it is important to invest your business resources in an adequate implementation of your collections management area.

What will you find in this text?
The role of the collections department in a company

The main function of the collection management area

The risks of poor debt collection management

What can you do to improve your company's debt collection management?

Apply preventive collection techniques

Have a well-designed collection strategy

The role of the collections department in a company
The first thing we should mention is what functions a collections buy usa email database performs in an organization, in this way you will be able to identify how it differs from the functions of a credit department.

The main function of the collection management area
The purpose of creating a collections department is to be in charge of recovering accounts receivable and following up on each one of them. As part of this objective, the collection managers (who are the ones who make up this team in a company) must be able to analyze the portfolio and design strategies and controls that allow the recovery of accounts receivable .

Likewise, it is the collection department that must carry out an adequate and precise follow-up of these accounts, in order to identify in time those that could fall into judicial collection. In the event that an account is written off, it is the collection managers who are responsible for informing the risk centers regarding said delinquency, in this way other companies that offer credit can quickly identify this client profile when requesting loans or credits with them.

The risks of poor debt collection management
As we have seen, the objective of a debt collection department is to ensure that the company is able to collect its accounts receivable; in this way, it will be able to have the necessary liquidity to cover its liabilities, continue its operation and grow. In this context, poor management of accounts receivable could cause major financial problems for the company, including:

1. Lack of liquidity, which affects the acquisition of supplies or the payment of suppliers or employees.