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| Writing a Collection Manual |
The Value of a Written Credit Policy
Sometimes having policies in place actually required more
work to complete than the amount of value that they offer. This lack of
meaningful value often leads to many policies and procedures being forgotten
about. However, while some policies and procedures are not vital to the
function of many businesses this is not the case in regards to a written credit
and collection policy. Some policies and procedures are not vital, but a
written credit policy is the exception and holds vast importance. As a debt
collection attorney, the value of a written credit policy can’t be overstated.
Why Does It Need To Be Written?
The main point of a written credit policy is to remove
confusion and make everything very clear. This type of policy is designed to
remove all biases and make sure that all credit decisions are given the same
credence. A policy in place will help to remove error and be well worth the tie
investment that comes with creating a written policy. This type of credit policy
should not be seen as a burden, but as a method to make debt collection
simplified. It is a written plan in place that will make continuity attainable.
No Change
Making sure that your debt collection procedures remain
unchanged is only possible through the use of a written policy. This written
policy can be consulted whenever a disagreement arises and you can still ensure
that continuity is upheld even if turnover exists within your debt collection
department. As long as the policy remains in place, it does not matter if
employees change over time. Some employee turnover is unavoidable, but a
written debt collection policy in place will make the transition smoother.
Fair and an Acceptable Training Method
When it comes to debt collection, fairness is of the upmost
importance. A written policy in place is the easiest and most effective way to
ensure that everyone is treated fairly. There are no biases that will arise
when specific debt collecting procedures are in place. Decisions are easily
made and no questions regarding fairness can be made. A written policy is a
training tool that serves as a guide and can help to answer questions as they
come.
Now common questions like evaluating credit worthiness and
approving extensions will be made based solely on written policies. All human
error will be removed from the equation. When it comes to using an effective
training tool, nothing is better than a written debt collection or credit
policy.
What Things Should Be Included In Policy?
Creditworthiness Evaluator
Determining credit worthiness should be broken down into a
science. This will ensure that no one is discriminated against and all credit
decisions are based on procedure only.
This means that all of the stipulations and guidelines for determining
creditworthiness can be made easily accessible and can be understood by all
parties involved. It helps to remove confusion and makes things function with
more ease. It is now easy to determine if creditworthiness is obtained. Trying
to figure out if someone is credit worthy without a policy in place can be
maddening.
Terms of Sale
The largest benefit of written policy is that all terms can
be clearly stated. This means that if there are company standards for terms of
sale, they can simply be a part of the written policy. This also includes
dates. Some companies are more willing to extend dates, but others are more
stringent with debt deadlines. Having procedures written involving dating
policy allows everyone to be on the same page and for less errors to occur.
Everyone will clearly understand if extensions are a part of policy or not.
Other terms that should be stipulated in the written credit policy include the
conditions at which extensions are allowed and the amount of time that they are
granted for. Having these policies in place is essential if extensions are a
part of company policy.
Authority Limit
Credit managers do need some leeway when dealing with
clients, but written policies can be used to limit their authority somewhat and
give them guidelines to abide by. Debt collection does take a bit of
flexibility, but details the consequences of going above authority and the
signature requirements that are in place. Showing the members of management
that can override decisions should also be a part of written policy.
Credit Files
Debt collection policy should also look to outline the
amount of frequency at which credit files will be updated. This is not only
vital to employees, but also important to individuals looking to manage credit
risk. This means that terms used to identify when financial statements are
necessary should also be in place and outlined for all to verify. The employees
in charge of evaluating credit history should also be outlined and the
guidelines for determining unacceptable credit risk should be clear allowing
for no mistakes.
Contacting Customers
When it comes to contacting customers based on outstanding
debt, it is essential to have a written policy in place. You have to determine
how often customers will be contacted based on the amount of the past due debt
and the time frame where contact begins. This means including in the written
policy how soon a debt is seen as past due and how quickly a credit hold can be
placed. Credit holds require even more detail, because the authorization of such
a hold has its own terms. This involves deciding who can authorize a credit
hold and what parties have to know about the credit hold. How notification
takes place should also be included in the written policy and those that have
authorization to withdraw open account terms should also be identified.
These are the main components of written policy and all of
these questions and topics should be outlined and addressed to ensure that a
full understanding of terms is reached. This is necessary for both employees
and customers. Now everyone will know all terms and policy that are expected.
What To Avoid With Your Written Policy
It does not matter if you are creating new policy from
scratch or updating old policy, there are certain things that you must avoid at
all costs.
No Credit Policy Secrets
You do not want to make your credit policy concealed or hard
to understand. This means that your credit policy should be understood and
accessible to all senior management and all employees in general. It should
also be noted that your policy must be slightly flexible. You have to have some
leeway for those that are in charge of making credit decisions. Policies should
be clear and concise, but the human factor should also be accounted for.
However, this is a fine line because you do not want your policy to be so
flexible that the guidelines are not clear. It can be difficult to create a
written policy that strikes a good balance between rigid and flexible.
Update Often
A written credit policy is mandatory, but you can’t get
comfortable with your procedure forever. You must regularly look to update your
written policy and make changes as problems arise or credit restrictions become
more complex. Your written policy is mandatory, but you have the ability to
update and review it over time to ensure that it is still relevant.
Marcadis Singer, PA
Florida Collection Attorney
5104 South Westshore Blvd.
Tampa, Florida 33611
info @ marcadislaw.com
(888) 547-1881
(813) 288-1881
New Clients
Ext. 247 Gil Singer
Ext. 240 Ralph Marcadis
Existing Client Client Liaison
Ext. 242
To Pay a Claim
Ext. 245
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