Advanced Collections Management CCP Notes


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This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to use advanced tools, methods and techniques to manage collections in a complex business environment.



A candidate who passes this paper should be able to:

  • Formulate and implement an organisation’s collections strategy in line with legal and regulatory organisational requirements
  • Manage collection of debts through Litigation
  • Adjust the management of collections activity at different stages of collection cycle and advise the management regarding provisioning and write-offs
  • Manage the challenges of internal and external relationships during collections
  • Evaluate commercial conclusion of debts, engage and manage external collection agencies



Collection policies and strategies:

  • Designing General and Specific Collection Policies
  • Restriction of application of certain policies
  • The reviewing of the credit cycle from application to ultimate payment
  • Assessing the impact of outstanding debt on your company’s financial results
  • Designing the hiring process of a collections manager and staff and Structuring collections work
  • Illustrative case studies on designing collection strategies, structuring collection work


Collection performance measurements and reporting

  • Average time to issue invoices
  • Best possible Days Sales Outstanding (DSO)
  • Number of active customers per credit /collection officer
  • Bad Debt Percentage
  • Collection effectiveness index
  • Cash collected per aging bucket
  • Percentage collected of assigned collection target
  • Percent of cash applied on day of receipt
  • Partial payment agreement percentage
  • Receivables aging by group with estimated doubtful accounts
  • Receivables monthly Management Report
  • Illustrative cases on calculation of collection performance


Management of Non-performing Assets

  • Non-performing Assets definitions and concepts
  • Classification of accounts as Non-performing Accounts (NPAs)
  • Prudentials Norms classification – Normal, watch, sub-standard, doubtful and Loss
  • Importance of Non-performinng accounts management
  • Provisioning Norms
  • Recovery of NPAs – strategies for reducing NPA’s
  • IFRS 9 application in management of Non-performing Assets
  • Illustrative cases on management of non-performing accounts Management


Trade Credit Insurance

  • Types of trade insurance products- whole turnover, selected part, selected buyers, single buyer
  • Types of risks covered
  • Content of a trade credit insurance contract
  • Loss and indemnification- recovery
  • Obligations of the insured
  • Debt Collection by the insurer
  • Illustrative cases on trade credit insurance collection


Legal Debt Collection Process

Preliminary considerations before initiating or defending debt

  • Recovery suits
  • Letters of demand
  • Capacity to sue
  • Mediation
  • Acknowledgement of debt
  • Evidence of indebtness
  • Statute barred debts
  • Viability of debt recovery
  • Availability of the debtor
  • Enforcement and Execution


Institution of suit

  • Locus standi
  • Jurisdiction
  • Pleadings
  • Service of summons



  • Summary judgment
  • Attachment before judgment
  • Presentation of evidence


Judgement and decree

  • Extraction of decree
  • Execution of decree
  • Attachment and sale of property
  • Attachment of debts
  • Garnishee orders
  • Committal to civil jail examination, charging order, liquidation and bankruptcy
  • Illustrative cases on Legal Debt Collection Process


Planning and preparing for effective debt collection:

  • Preparing reports and statistics collection activities and advising management
  • Classifying debtors to enable a well-targeted approach – Portfolio Management
  • Using the Debtors classification to analyze the potential risk each debtor poses to the company – Aged Debtors, 80/20 Rule
  • Controlling customer accounting activities
  • Drawing up a collection checklist to facilitate systematic collections
  • Deciding on whether to collect the debt by telephone, letter, personal visit or use third party debt collectors
  • Application of the Aging Debtors Analysis in Collection
  • Coming up with Write off policies
  • Illustrative case studies on reporting to management, Deciding the applicable methods in collection cycle and making critical decisions such as write off or legal


Customer Relations Schemes Customer House Keeping

  • The challenges of internal and external customers
  • Creating an integrated customer service System
  • Maintaining relationship with customers and accounts payable accountants
  • Keeping in Touch with the Customer
  • Dealing with the Customer’s Problems – Review customer complaints on over charges and disputes carefully
  • Identifying ways to motivate your customers to pay their outstanding debts
  • Developing a conducive and spirit of cooperation with other departments especially sales and finance, good communication is the key
  • Illustrative cases on calculation of collection performance


Outsourcing Debt collection and Recovery services

  • Services that require outsourcing
  • Steps before placing an account for collection
  • Factors to consider before hiring collectors
  • Motivation and Types of Fees paid to debt collectors
  • Evaluating performance of collectors
  • Contracts with debt collectors
  • Working with agencies and tracking the regularity of agency remittances
  • Illustrative case studies on hiring and using debt collection agencies





Designing General and Specific Collection Policies

collection policy is the set of procedures a company uses to ensure payment of accounts receivables. Similar to the credit policy as a whole, the collection policy should be written and strictly followed. Like a written credit policy, a collection policy serves as a window into the company philosophy as far as how credit and debt are treated.

Further, strict compliance with the collection policy as its written allows the business to be more streamlined, with no time wasted on deciding when or how to respond to a certain debtor situation.


Generally, a collection policy systemizes the steps taken to recover amounts due prior to litigation. This includes:

  • When customers should be contacted
  • How they should be contacted, how disputes are resolved
  • When internal or external “collectors” are used to step-up collection efforts
  • When and whether to turn the account over to litigation or write-off the debt


Complete copy of CCP Advanced Collections Management Revised Notes  is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317


Deciding on a Collection Policy

Once the decision has been made to formalize a collection policy, it must be decided whether the policy will be formulated from scratch or whether the disparate pieces of the current collection structure can be melded into a cohesive outline.

Just like a comprehensive credit policy, a collection policy should not be an off-the-shelf or one-size-fits-all product. Each individual business will likely want to treat the collection policy in a different way – some are much quicker to send a sternly worded letter or firm phone call upon late payment, whereas some will let the account simmer for a short period of time.

As with many things in life and business, a moderate approach that balances the reality of the market with the need to get paid according to the terms of the credit extended is likely the best solution.

Strict adherence to the collection policy is generally best in order to streamline collections efforts and exercise oversight of the decision making processes. That doesn’t mean that all clients must be treated the same under the collections policy. Clients with an established relationship, for example, may be extended the courtesy of an extra phone call or a couple of letters before the account gets placed with an outside collection firm.

Business relationships can easily sour over something like sending a delinquent account to an outside collections firm so that knowledge is important in the crafting of a proper policy.


In-House vs Outsourced Collections

The first part of any collection policy is generally in-house. The question is whether or not the collection policy should keep the whole process in-house, or if it should eventually be outsourced, and to determine when that point comes.

Of course, things like making a nice phone call before the payment is due in an attempt to ensure prompt payment, and even a stern letter after the debt becomes due can easily be handled in-house. However, there are certain things that an outside collection company can do that would strain the time or resources of many businesses.

Outside debt collection agencies can be beneficial for several reasons, including their experience specifically in debt-collection, notifying the debtor that the company has escalated the debt collection process, spending time and resources to continually contact the debtor with letters or phone calls and responding to and locking down promises to pay, reporting the debtor to credit bureaus, and more.

Clearly this must be balanced with the cost associated to use an outside collection agency compared to attempting to keep the process completely in-house. The collections part of a credit policy can often be overlooked, but it is an essential part of a sound and comprehensive credit policy. Download a sample credit policy template.


Sample Collection Policy

A collection policy doesn’t have to be complicated. This sample is just 5 steps, outlining the sequence of actions you will take after every invoice. Each subsequent step assumes that you did not receive payment after the previous step.

  1. ________ days prior to account being due, send an invoice reminder. Send an email and make a phone call to the customer thanking them for their attention and business, and reminding them that they have an upcoming payment due date.
  2. ________ days after due date, make a phone call reminding the customer of the due date, and the balance due. If the customer is local, stop by to talk and discuss the account at this time.
  3. ________ days after the phone call in (2), send a demand letter reminding the customer of the overdue balance, the terms under which the credit was extended, and the service charges that are accruing.
  4. ________ days after the letter in (3), send a Notice of Intent to Lien.
  5. ________ days after sending the NOI, file a mechanics lien.
  6. ________ days after filing a lien, send a letter notifying the customer that the account has been placed on hold, no further credit will be extended, and, if the outstanding balance is greater than $[ ], that the matter has been turned over to an outside collections agency — turn the account over to a collections agency.
  7. ________ days/months after the account has been turned over to an outside collections agency, determine whether to:
    1. Write off the debt; or
    2. Move from collections to litigation. At this point, you will likely want to send a letter to the client notifying them that their credit account has been cancelled.


Goals of a Collections Policy

The purpose of having a collections policy in place is simple – to protect accounts receivable. Efficiently collecting payment on current accounts receivable and past-due accounts while maintaining positive customer relationships is the main goal of the collections department.

On a practical level, businesses should be proactive with collections and transparent regarding goals and expectations. A thorough collections policy should embody these goals and expectations. Common goals of collections departments include:

  • To have your Collections Effectiveness Index* (CEI) be at a defined number or higher
  • To have your Days Sales Outstanding** (DSO) be at a defined number or lower
  • To reduce your bad debt by a targeted amount
  • To reduce the number of invoices sent to a third-party collections agency


Complete copy of CCP Advanced Collections Management Revised Notes  is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317


  1. When to Contact Customers
  • Days 1-3 past due: Confirm invoice was sent, confirm there are no disputes, and send automated email reminder including account statement.
  • Days 31-45 past due: Mail letter on company letterhead stating payment is now 30 days late. Apply late fees to account.
  • Days 4 -7 past due: Contact customer by phone and/or email attempting to secure payment. Ensure any discrepancies or disputes have been resolved.
  • Days 46-60 past due: Begin calling and emailing customer every 3-5 business days. Place account on credit hold and notify sales representative and customer of credit hold.
  • Days 8-14 past due: Send second automated email and follow up with a professional, scripted phone call. Notify sales representative that payment is now one week late.
  • Days 61-90 past due: Notify senior management and prepare to send account to collections agency and/or legal counsel and/or write off as bad debt.
  • Days 15-30 past due: Send third automated email stating account will incur late fees after 30 days. Follow up with a phone call to confirm receipt and remind customer of late fees.
  1. How to Handle Disputes

A comprehensive collections policy should include guidelines on how disputes and deductions should be handled. Before initial contact with a customer, the collections professional should ensure that any internal issues are cleared up. These might include unapplied checks, unused credits, or any special terms offered by the sales representative but not applied to the account. If a dispute arises during interactions with the customer, handle it quickly to avoid slowing down the receivables process. For example, if you wait a week to send the customer a corrected bill, you’ve just put off getting paid by a week.


  1. When to Send Accounts to Collections Agencies

When all internal means of collecting on a past-due account have been exhausted, some companies choose to turn the delinquent account over to a third-party collections agency. A collections agency is a company used to recover funds that are past due or from accounts that are in default. This step in a collections process usually occurs when the account is 60 or more days past due.

There are several factors that influence a company’s decision to turn past-due accounts over to a collections agency. One factor is the company’s risk tolerance for bad debt. If positive cash flow would not be greatly impacted by a certain level of bad debt, a company may choose not to outsource collections efforts. On the other hand, a company with tighter profit margins would likely be more risk averse and may set forth in their collections policy the transfer of past-due accounts to a collections agency at a designated number of days past due.


  1. When to Write Off Bad Debt

If it has been determined by the collections team, in congruence with the collections policy, that the debt has become worthless (because it can’t be collected), then it can be written off. Writing it off means adjusting your books by removing it from the accounts receivable balance so that it is not represented in the total amount of your current accounts.


Managing Exceptions to Your Collections Policy

Of course, there are always exceptions to established procedures, even with a collections policy. Your policy should be structured and consistent but also flexible, so it can adapt to changing times and uncertain environments.


Negotiating Terms

Customers who are aware of their inability to make timely payments may want to renegotiate terms or arrange a payment plan. However, extending terms disrupts your cash flow. Perhaps the customer is offered an extended payment plan, but with the extension they agree to forfeit discounts. If payment is still late after renegotiating terms, the customer forfeits the right to renegotiate for an extended period.


Measurement of Your Collections Policy

Once goals are established and procedures best practices are defined, it’s important to identify metrics to help measure and evaluate the effectiveness of your collections policy. Regularly monitoring performance helps identify process issues that could be slowing down collections.

The metrics should align with the goals you have set for your collections policy, be consistent, and aim to improve the quality of work performed by your collections professionals.

As mentioned earlier in the context of setting goals, (DSO) is a common metric used in the collections process. DSO is widely used as an overall measure of accounts receivable relative to credit sales. If your goal was to keep your DSO below a certain number, did you achieve it? If not, what can you do to get there? If you find that the targets are not being hit, consider adjusting your collections policy accordingly.

As an added measure, by calculating DSO for those customers with extended terms and comparing them to all other customers, you can better determine the impact of extended terms on your receivables performance. Further, the receivable balance for customers with extended terms should be closely monitored to provide insight into any trends and as a point of comparison with standard-term customers. This will help determine whether your extended-term approvals are being honored, and whether your monitoring and collection efforts are effective.

As a reminder, extended terms are a customer courtesy. In some cases, it is a tactic to preserve sales, while in others the hope is for increased sales. With this in mind, the profits generated by extended-term sales should be tracked at least quarterly as well as year to year, and perhaps even more frequently during times of financial uncertainty.


Restriction of application of certain policies

  • Time and place. Generally, debt collectors may not contact you at an unusual time or place, or at a time or place they know or should know is inconvenient to you. They are generally prohibited from contacting you before 8 a.m. or after 9 p.m. Also, if a debt collector knows or has reason to know that you’re not allowed to receive personal communications at work, they’re not allowed to contact you there. If they call you when it’s inconvenient for you to speak with them, you can tell them that and they’re required to terminate the call.
  • Social media and other electronic communications. A debt collector may not use social media to publicly post about a debt that they claim you owe. However, they can contact you privately on social media, unless you request that they not contact you that way. If the debt collector communicates with you using an email address, telephone text number or other electronic medium, they must offer you a reasonable and simple method for you to opt out.
  • Harassment. Debt collectors may not harass you or anyone else over the phone or through any other form of contact, including text or email.
  • Representation by attorney. If a debt collector knows that an attorney is representing you about the debt, the debt collector generally must stop contacting you and must contact the attorney instead. This is only true if the debt collector knows, or can easily find out, the name and contact information of your attorney. If an attorney is representing you and a debt collector calls, give them your attorney’s name and contact information and tell them that they should contact your attorney directly, instead of you. It’s also a good idea to keep all documents sent by a debt collector and write down dates and times of conversations, along with notes about what you discussed. These records can help you if you meet with a lawyer or go to court.


The Fair Credit Reporting

The federal Fair Credit Reporting covers how financial matters, including debts, can be reported in your credit report.

For example, if a debt collector provides or furnishes information to a consumer reporting companies that you believe is inaccurate, you have the right to dispute that information and the credit reporting companies must:

  • Note on your credit report that you are disputing the information
  • Investigate your dispute
  • Forward all documents you provide in support of your dispute to the company that provided that information
  • Report the results back to you


The reviewing of the credit cycle from application to ultimate payment

The credit cycle is the process by which a lender evaluates and approves a loan application and then manages the repayment of that loan. The credit cycle can be broken down into several stages, from the loan application to the ultimate payment:

  • Application: The borrower submits a loan application to the lender, providing information about their credit history, income, and assets.
  • Evaluation: The lender evaluates the loan application, assessing the borrower’s creditworthiness and determining whether to approve or deny the loan.
  • Approval: If the loan is approved, the lender and borrower agree on the terms of the loan, such as the interest rate and repayment schedule.
  • Funding: The lender provides the funds to the borrower in accordance with the terms of the loan.
  • Repayment: The borrower repays the loan according to the agreed-upon schedule, making regular payments to the lender that include both principal and interest.
  • Monitoring: The lender monitors the borrower’s account to ensure that they are making their payments on time and that their account is in good standing.
  • Collections: If the borrower falls behind on their payments, the lender may initiate collection efforts, such as contacting the borrower directly or hiring a collection agency.
  • Charge-off: If the borrower continues to default on their loan, the lender may charge off the loan, which means that the lender has given up on collecting the debt and written it off as a loss.
  • Legal action: In some cases, the lender may take legal action against the borrower in order to collect the debt.
  • Final payment: Once the loan is fully repaid, the credit cycle is complete, and the account is closed.

It’s important to note that credit cycles are different among different types of loans and credit facilities, and some stages may vary or not exist depending on the type of loan or facility.


Assessing the impact of outstanding debt on your company’s financial results

Debt capacity refers to the total amount of debt a business can incur and repay according to the terms of a debt agreement. A business takes on debt for several reasons – such as boosting production or marketing, expanding capacity, or acquiring new businesses. However, incurring too much debt or taking on the wrong type can result in damaging consequences.

How do lenders make decisions on which businesses to lend their money to? In this article, we will explore the most commonly used financial metrics to evaluate how much leverage a business can handle. At the end of the day, lenders wish to have comfort and confidence in lending their money to businesses that can internally generate enough earnings and cash flow to not only pay the interest but also the principal balance

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