Accounts Receivable Management

Today\u27s accounts receivable management and debt collection industry is a very complex one. Many changes have occurred in the last decade that have changed the scope of this industry. Prior to the original Fair Debt Collection Practices Act companies with accounts receivable had two options. They could either pursue the collection of the account through their own internal system or write the account off as a bad debt. In 1978, due to consumer awareness the federal government imposed an act known as the Fair Debt Collection Pratices Act (FDCPA), The FDCPA has changed through the years and evolved into its present form. It is also fair to assume that the act will continue to change with an objective viewpoint of the consumer, companies which carry accounts receivable, and the different variable laws surrounding the industry. FDCPA laws prohibit the consumer from over aggressive collection practices. Most consumers have intentions of paying their accounts in full. They have simply reached a temporary emergency situation that prohibits them from being able to pay on time. Although the law does not prohibit them from ignoring the account it does provide them with additional consumer rights. From a companies standpoint, when you provide a service to the consumer, you expect to be paid for that service. Depending upon the industry, it is almost assumed that you will extend some form of credit. These accounts are considered a companies asset until the point in which they are written off the companies books; therefore, the company has litigation alternatives against overdue accounts. Debt Collection Firms are in business to make a profit. Their objective is to collect overdue accounts for their clients firm. In return, they are usually provided with a commission percentage of the money collected. Business is conducted through a series of letters, phone calls and litigation procedures. Given the restraints put into effect by the federal government there are proper methods that need to be utilized to effectively manage this business. The purpose of this paper is to evaluate the debt collection industry and compare effective management techniques for accounts receivable. After reviewing the paper the reader will possess sufficient knowledge to make future decisions regarding credit analysis, alternatives a company has with its past due accounts and laws governing the debt collection industry