While companies rely on hundreds of organizations to complete their operations, few, if any, are more important than collecting on receivables and debts owed for services performed. When a company determines it is more efficient to rely on a third-party to perform this service, a relationship of trust must be maintained at all times. A proper control environment must be maintained to achieve this goal. Consideration must be given to laws and regulations such as the Fair Debt Collection Practices Act (FDCPA). Your clients require you are proficient in this area and rely heavily on your expertise.
- New Placement Receipt and Changes - Receiving placements is the first step in the collection process. Placement information includes A/R or debtor contact information, amounts owed, and other information required to perform collection functions. This information must be received in a secured manner, reviewed to ensure the information received is complete, and entered into the system for collection. If the information is not received properly, the collection efforts will not be able to produce the desired results.
- Collections Processing - The effort used to contact the debtors is crucial to the collection process. Controls must be in place to ensure all collectors are properly trained, monitored by supervisors, and comply with all applicable laws during the collection process.
- Receipt of Payments - Whenever a company is receiving funds on behalf of another company, controls must be in place to ensure proper receipt, accounting, and remittance of the funds is maintained. Payments can be received through walk-in payments, through the mail, online, or taken over the phone. Proper segregation of duties must exist at all times during the collection and deposit cycle.
- Reconciliation - Regardless of the manner the funds are collected, all funds received should be reconciled to the amounts entered into the system and the amounts deposited into the bank accounts. If individual client bank accounts are used, particular care must be taken to ensure that the funds are deposited into the correct account. The reconciliation process should address this concern.
- Reporting - Transparency is crucial when collecting receivables for another company. Ensuring that the reports are compiled and delivered in a timely and accurate manner is essential for a successful relationship with your clients. If a third-party is utilized to print and mail these reports, controls must be in place at that organization. If the reports are sent electronically, security or encryption must be employed during transmission.
While your clients are able to outsource the billing and collection of receivables and debts, it cannot outsource the risk and responsibility for ensuring the customer information is secure. Your clients need assurance that the information provided to your company is received in a secure manner, processed appropriately, funds received in a controlled environment, proper payments are made on collected debts, and reporting is performed in a timely manner.
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