Accounting Best Practices, Fifth Edition

7–19. Access Up-to-Date Collection Agency Information

Most companies have an in-house collection system in place, which they use to track the status of collection efforts on overdue invoices. This approach works fine until the in-house collections staff forwards receivables to third-party collection agencies for more aggressive collection efforts. At this point, the company has no way to update its receivable information, short of calling each agency and manually updating information about each invoice. Though this solution may be sufficient for companies with a small volume of outsourced collection work, a more automated solution is needed for higher-volume entities. Here are some solutions that improve the flow of collections information back to the company:

• Allow collection agencies on-line access to the corporate collections database. Though this approach does result in the use of a single corporate database, as well as no need for additional staff data entry, it also presents several problems. First, collection agencies may obtain access to the company’s entire receivables database, including information about other receivables and collection agencies. Also, the company must provide training to the collection agency, and also runs the risk that any data entered will be inaccurate. Further, because of the company’s training investment, it will be more likely to use only a few collection agencies, rather than trying out new ones.

• Obtain on-line access to collection agency databases. ...