The Three Pillars of an Effective Collection Process

Managing outstanding and unpaid debts is one of the most frustrating aspects of running a small business. Instead of devoting your time to acquiring new business or pleasing customers that are current with their accounts, you are forced to turn your attention to delinquent accounts that you already delivered your product or services to.

While no one enjoys taking the time to follow up on accounts receivable, it is a necessary evil that comes with any type of business that extends credit to its customers. If you are going to be forced to handle outstanding debtors at some point, it is certainly in your best interest to make sure that you are doing so in the most productive manner possible.

In a recent article for Collection Advisor Magazine, Bob Dunham wrote about the three most important aspects of any collection agency. He explained that an efficient American debt recovery should always be built around inventory management, technology, and communication.

I would like to take Dunham’s article a step further and suggest that these three concepts form the pillars of any effective debt collection process. While Dunham focuses specifically on commercial debt collection agencies, his principles work just as well describing effective collection departments and even individual collection efforts.

Let’s break down how each of the three pillars could apply on a smaller scale:

Inventory Management

Dunham talks about inventory management from the perspective of a large agency that has either created its own management software or purchased software specifically for managing collection accounts. If collections are only a small aspect of your day-to-day business, you likely haven’t made that significant of an investment in your management software.

However, that doesn’t change the fact that you will need some type of system to manage your outstanding accounts. On the small business scale, this can be something as simple as a group of QuickBooks accounts or even an Excel spreadsheet. The most important factor to keep in mind is that your inventory management system needs to include ALL of your outstanding accounts, and everyone who attempts to collect on your behalf will need to have access to the database.


When Dunham talks about the technology pillar, he covers auto-dialers and voice-over-IP devices. While those make a lot of sense for commercial debt collection agencies, they probably aren’t worth the cost for smaller companies that are attempting to collect outstanding debts themselves.

Those companies will want to focus on other technology that is available. This might include smartphone apps to track collections, software to help with inventory management, a program to record phone conversations, or the ability to email and text message debtors.


For the communication pillar, Dunham suggests communicating performance track records with the employees that are making collection calls. If you are a small business owner, you might be doing all of the collection effort yourself. That doesn’t mean that communication is any less important, you just have to conduct that communicate internally.

Regardless of how many people are involved in your collection process, it is important that everyone is on the same page with respect to the results that are being obtained through your strategy. That is the only way that you will know what elements of your strategy are effective and which are a waste of time.  

If you are attempting to handle your outstanding debt collection internally, you will definitely want to make sure that each of these three pillars exist somewhere in your operation. If you are looking to subcontract your debt collections, these three pillars are a great starting place when assessing the capabilities of any commercial debt collection agency.

By |2018-09-24T13:41:49+00:00April 22nd, 2014|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present