For creditors in Connecticut who are concerned about how you’ll collect your money after providing goods or services, it helps to start with an understanding of the two main types of collections: consumer and commercial. Also referred to as B2B or business-to-business collections, commercial debt collections are the ones that come into play whenever one business sells to another or works with them in some way. Once the goods or services that have been agreed upon are delivered to the other company, commercial debt collections can commence.
How do commercial debt collections begin?
The debtor or client has typically signed a contract or some other form of agreement by that point stating that they owe money to the business once the deal is complete. From there, the business generates an invoice that defines the payment terms within which the client can distribute payment.
The creditor in this arrangement is the business providing goods and services. Therefore, it’s that entity’s responsibility to collect the debt that it’s owed. But sometimes, it takes more to complete the debt collection. In some cases, a business will need to employ a debt collection agency. This agency can act on behalf of the creditor and handle the situation by following a debt collection process.
The good news for creditors is that these agencies don’t receive payment until the debt collection is successful. The strict regulatory scrutiny that consumer debt collection undergoes is a cautionary measure to safeguard creditors against deceptive consumer debt collectors.
How does commercial collection differ from consumer collection?
Some collection practices can be used in commercial collections that aren’t allowed in consumer collections. This is partly due to the privacy protections that consumer information is subject to.
But with a business, a substantial amount of its information is already public knowledge. Still, any agency that handles commercial debt collection must be bonded and have the appropriate licensure, no matter which state they operate in.
To determine whether or not your commercial debt collections will require third-party intervention, it’s helpful to run through a set of critical criteria. For example, it may be time to consider hiring an agency if any invoices are over 45 days late or if you have an accounts receivable department that doesn’t feel comfortable with the situation. Also, ask yourself if there are clients who regularly provide late payments or clients who won’t get back to you.