The Collection Agency Is on Your Side. Is Your Team?

Sending an Account to Collections Is Only the First Decision

A careful credit policy and a seasoned AR team will shrink the delinquent column without ever emptying it. Somewhere in the ledger sits an invoice that has outlasted the reminders and the promises that followed them, and sending that account to collections belongs to ordinary receivables management in the same way issuing the invoice did. A company that treats placement as an admission of failure tends to place late, and the timing of placement shapes recovery more than most credit teams expect.

Handing the file to an agency settles very little by itself. The company keeps authority over the account, but once it has been placed, individual employees should stop independently pursuing, negotiating, or changing the balance. What happens inside the company in the days after placement decides whether the agency spends its time pursuing the debtor or competing with the client's own employees for control of the account. Many credit managers have watched the second version play out at least once.

Every Department Measures Success Differently

Sales wants the customer still buying next quarter. A representative who spent years earning a customer's trust sees a collection agency as a threat to that trust, and when the debtor calls to complain, the instinct to step in arrives well before the question of whether stepping in is allowed. AR staff want to show they can recover the accounts assigned to them, so placement can read as proof they gave up too early, and one more call or one more extension can look like it will settle the balance while the agency waits for that hope to run its course. Branch managers and leadership carry their own numbers. A location with a growing pile of accounts sent to collections looks worse on paper than one that keeps the same balances on its aging report, and short-term sales numbers can crowd out recovery when the two compete.

None of this requires bad intent. Each of these employees believes they are protecting the company, and each is right about something the company values. The trouble starts when individual incentives meet the company's broader financial interest and nobody has decided which one governs. An employee can undermine a collection agency without opposing it, and a single well-intentioned phone call is usually enough.

The Debtor Knows Who to Call

Debtors rarely lose the phone number of the person they have always dealt with. Once collection activity begins, that relationship becomes a second channel for negotiating or delaying payment, and some debtors will use it.

One equipment client placed an overdue account with JSD. When JSD contacted the debtor about the balance, the debtor reached out to the original sales representative instead of resolving the account with the agency. The representative, concerned about the customer relationship, then called JSD and asked that collection efforts stop. The agency now sat between its assignment to recover the balance and a request from inside the client company to back off. Whether the representative had authority to intervene was a question for the client company. But the request itself created a conflict. JSD had been instructed to pursue the account, while someone inside the creditor's organization was now asking it to stop.

A debtor who learns which phone number at the creditor can stop a collection call has little reason to call anyone else. The representative's concern for the customer was reasonable. The company still holds authority over the account, but after placement that authority belongs to whoever owns the credit decision, and not to every employee who takes the debtor's call.

A Placement Needs Rules for Everyone Who Touches the Account

Placement should change how employees handle the account, and the changes are small enough to explain in a single meeting. Once an account is with an agency, these rules apply.

• The agency is the primary contact for collection discussions. A debtor who calls a sales representative about what is owed gets referred back to the agency.
• A debtor who wants to pay can pay through the company's usual procedures, and the agency hears about the payment promptly so its records stay accurate.
• Any dispute gets documented and sent to the agency and to the person with authority to decide it, since a legitimate billing dispute may still need the company's involvement.
• Employee requests to pause collection activity must be approved by the credit manager or another authorized decision-maker.
• When the agency asks for the signed contract or the invoices behind the balance, the company sends them quickly.

The company keeps every decision that matters, from settling the balance to withdrawing the account, and those decisions get made once by the person who owns them. Rules like these hold up better as written policy than as an appeal to goodwill, since policy still functions on the day a well-liked customer calls a well-liked salesperson. A placement policy should include the five items below.

• A review trigger. A threshold such as 90 days past due or a poor score on the Vital Warning Signs checklist puts the placement decision in front of someone with authority. The review can turn up a legitimate reason to wait, and it still forces the question to be answered on purpose. When the answer is yes, the account moves on to placement.
• Advance notice. Everyone who manages the customer gets a window to flag a genuine dispute or a payment that has not posted. Hearing those objections before placement costs far less than hearing them after.
• Written authority over holds and settlements. One employee's conversation with a customer should never be enough to interrupt the agency's work.
• An internal placement notice. A short note that the account has been placed tells anyone who might take the debtor's call what to say.
• Performance measures that match the policy. Employees measured only on keeping accounts out of collections will keep behaving exactly as that measurement tells them to. Measuring them on following credit policy and documenting disputes moves the incentive to where the company wants it.

The Agency and the Client Know Different Halves of the Account

The company knows the customer's history. The agency knows how to pursue the receivable. Recovery works best when those two kinds of knowledge reinforce each other, which means the creditor's employees pass along what they know about payment history and earlier promises instead of running a separate negotiation beside the agency's. When a debtor raises a possible dispute or a commercial concern, the agency passes it to the company, and the two coordinate through whoever holds that authority. If the dispute may be valid, they resolve it before collection activity continues on that point. How an agency works an account from placement forward is laid out in our overview of the commercial debt recovery process.

There will always be one. Some account will outlast the company's own efforts, and some employee will believe they can still collect it or keep the customer along the way. That belief comes from years of effort and professional pride, and it deserves respect right up until the day the company decides to place the account. After that day, an agency whose every call can be undone by a phone call to sales or an informal promise from AR works the account at a disadvantage, because the debtor has reason to wait for the next override. Every company will eventually have an account that needs outside help, and the part left to decide is whether the company will stand behind that help when it arrives.