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Cash collection is the process of collecting debts before they become overdue. Companies attempt to negotiate payment arrangements and may issue pre-harvest notices before referring the account to a collection agency or taking legal action. Reputable collection agencies do not charge upfront fees and take a percentage of the debt once it is paid. It is important to consider the value of the debt versus the cost of recovery.
After an invoice has been issued, monies owed for products or services that have been provided on credit are referred to as credits. Cash collection is the process of redeeming or collecting claims. While cash collection can usually be handled by the service or product provider, difficult cases can be referred to cash collection agencies or the courts.
Cash collection is a debt collection function of a business that aims to address payment issues long before accounts are due or delinquent. Collecting cash usually involves negotiating payment arrangements and ensuring that the money is paid sooner rather than later than the agreed time. To this end, it is important that companies or individuals issuing invoices include clear payment terms and instructions regarding the payment process. This greatly facilitates the process of collecting money by invalidating any claims that the debtor did not understand the payment procedure. When an invoice remains unpaid for longer than the allowable amount of time specified in the invoice payment terms, it is considered an overdue account.
When dealing with overdue accounts, companies will often attempt to send letters and make several phone calls to re-establish contact with the debtor and to try to negotiate further. If that’s impossible, they may try to issue a pre-harvest notice. This is when, before an account is taken over by a collection agency, a notice is sent to the client stating that it is their last opportunity to contact and deal directly with the company instead of an agency whose tactic it will probably be more aggressive. Collection companies find alternative ways to contact the debtor and can take legal action, such as a lawsuit, against him or her.
When an account is given to a cash collection agency, it is in effect sold to them. They become the new legal owner of the account and thus the debt is theirs to collect. Reputable collection agencies do not normally charge upfront fees from their clients, but instead agree to accept as payment a large percentage of the debt once it is paid. For example, if the collection agency is to receive 40% of a successfully collected debt as payment, the individual or organization that took them out will only receive the remaining 60%.
Depending on the size of your debt, hiring a cash collection agency may or may not seem worthwhile. Another option is to take the matter to court on your own. Without proper training, it can be difficult and time-consuming to handle the details of a case; hiring a lawyer to do this is possible but, again, can prove to be an expensive alternative. Whenever it comes to an overdue account, it’s important to consider what’s more valuable: the amount of debt or the time and money it would have cost to recover it.
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