Master Debt Collection with Confidence: Your Comprehensive Glossary
A Business Owner's Guide to the World of Debt Collection and Debt Recovery
Collection Glossary
A
Accounts Payable
Monies a business owes its creditors or other businesses for goods or services
Accounts Receivable
Monies owed to your business for goods or services
Accrued Fees
Refers to late fees and finance charges that accumulate each money the owed balance goes unpaid
ACH
A secure way to pay for services, goods, and vendors which typically clear in 1-3 days
Administrator
A person responsible for running a business, organization, etc.
Advance Billing
When an invoice is raised before the foods are delivered or services completed
Adverse Credit History
A business with an adverse credit history typically has a poor record of settling debts within agreed credit limits, making them undesirable to offer credit to.
Aging Report
This is a report of all current outstanding invoices reflecting the number of days it is past due
Arrears
Term used by attorneys that means overdue debts
Assets
Refers to property owned by a person or company that is regarded as having value and available to meet debts and commitments
Assignment
The process where a collection agency assigns the debt to another agency or attorney to collect
Analysis
Detailed examination of the debtors financial history
Audit
A business review service that assesses various aspects of a business’s operations, such as their financial accounts and sales ledger performance.
B
B2B Debt Collections
Stands for Business - to - Business collections
B2C Collections
Stands for business to consumer collections
Bad Debt
Money that is owed to a business that is considered irrecoverable by standard practices. Discover ways to recover these invoices
Balance Sheet
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Bank Levy
Allows a bank to freeze the account(s) of a debtor until all the sought-after monies are paid in full
Bank Wire
A secure way to transfer money to another bank account to pay for goods and services
Balance Sheet
An annual statement that gives a business’s financial position, detailing all assets and liabilities at a given date.
Bankruptcy
The process where a business is declared insolvent and therefore unable to settle it's outstanding debts. Remaining assets are transferred to a trustee and sold to settle debts with any remaining secured and unsecured vendors.
Broken Promise
A "broken promise" refers to a customers failing to uphold their promise to pay during the agreed upon time
Business Background Check
An external assessment of a business’s performance in key areas, including financial performance, funding facilities and credit control processes.
Business Restructuring
The reorganisation of a business’s structure in order to make it more profitable.
C
Cash Flow
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Cash on Delivery (COD)
The payment of products and/or services received is done at the time of actual delivery rather than paid for in advance
Certificate of Satisfaction
A certificate from the court to signify that a County Court Judgment has been paid in full.
Charge Off
A "charge-off" in credit and finance means a lender or creditor has written off a debt as uncollectible.
Claim Form
This is a form that is used to place an account with the clients information, debtors information, and terms or the collection agency
Commercial Collections
Commercial Collections refers to a business that needs to collect unpaid receivables from another business
Consumer Collections
Refers to an individual that owes monies to a business or individual
Consignment Collections
Refers to a business arrangement where a party (the consignor) provides goods to another party (the consignee) to sell on their behalf but does not pay for goods sold.
Consignor
The party who delivers goods to the consignee for sale
Consignee
The party that takes and sales goods from the consignor
Contingency Rate
this is the percentage fee that an agency charges to successfully collect a debt
Credit Terms
Refers to the amount of days a customer has to pay their invoices but may include more terms than this
Creditworthiness
term used to describe the ability of a business to make payments on time when offered credit terms.
D
Day Sales Outstanding (DSO)
The average number of days it takes for a business to recover monies in full after a sale has been made, indicating the efficiency of their credit control processes.
DBA
Stands for Doing Business As
Debt
Refers to an amount of money that is unpaid
Debtor
is used to describe a business or individual that owes money
Debt Collection Agency
Is an agency that is designed to collect debts efficiently and effectively
Debt Recovery
Means to recovery the debt owed to a business or individual
Debt Restructuring
Refers to a company reorganizing their debts to make it more manageable to pay
Delinquent
The failure to accomplish what is required by law or duty, such as the failure to make a required payment or to perform a certain action
Demand Letter
Is a letter demanding payment on an outstanding balance in a certain time frame
Default Notice
Refers to a customer breaking their promise to pay an agreed upon amount
Dispute
Refers to your customer stating issues with goods or services (true or untrue) in order to not pay, pay a reduced amount or prolong payment
Disbursement
Disbursement is the act of paying out or disbursing money. In a Debt Management Plan, it means your money is sent directly to your creditors each month.
E
End of Month (EOM)
Used in payment terms, payment plans, and demand of payment
Endorser
A person who is authorized to sign a negotiable security in order to transfer ownership from one party to another, or to approve the terms and conditions of a contract
F
Factoring
An invoice finance facility where a funder releases cash against the client’s sales ledger
With Recourse
- Refers to a factoring company giving you a percentage of the amount of all invoices combined but if they cannot collect, they will charge the uncollected amount back to you
Without Recourse
- Refers to the factoring company giving a small percentage of total amount due for invoices but take the risk incase of nonpayment
G
Garnishment
Garnishment is a legal process where a creditor can collect a debt by seizing assets, usually wages or money in a bank account, from a third party (like an employer or a bank) who holds those assets for the debtor
Guarantees
A legal commitment to pay a debt in the event the business fails to do so
H
I
Informal Arrangement
Term used to describe the agreement that the debtor will make reduced payments to its creditor without the assistance of a third party
Insolvency
A legal process where a business is declared insolvent and therefore having insufficient funds to meet a business’s credit commitments
Interest Rate
The rate charged on the value of the money being borrowed, usually displayed as an annual percentage.
International Collections
Refers to debts owed by companies in other country's
Invoice
A form issued by a seller that itemises the goods or services provided, and at what cost
J
Judgment
A formal decision made by a court or tribunal that resolves a dispute between parties, outlining the rights and obligations of each part
Judgment Enforcement
Refers to the process of enforcing a judgment in order to satisfy the judgment
K
L
Legal Action
legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty, resulting in harm to the plaintiff.
Liability
Is something that could cause harm to your business, but mostly refers to past due invoices past 90 days or customers with a bad credit history
Lien
a right to keep possession of property belonging to another person until a debt owed by that person is discharged.
Litigation
A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.
M
Monies Owed
Refers to the total sum of money a company is owed
Monetary Benefit
Refers to a company or individual that owes money but still needs goods or services from you, giving incentive to pay
Monetary Benefit (NON)
Refers to a business or individual that owes money but no longer is receiving goods or services from you
N
Net Terms
The number of days given to the customer to pay their invoice(s)
Negotiation
Refers to the act of getting your customer to agree to terms in order to satisfy payment
Nominee
A licensed Insolvency Practitioner appointed to oversee a company voluntary arrangement
O
Outstanding
Term is used for describing an account or monies past their net terms
Oral Agreement
This is an agreement between two parties that have not been papered into a contract
P
Paid in Full
or PIF is when a balance owed is fully satisfied and paid
Payment Plan
This is an agreement that is negotiated for a debtor to pay back their outstanding amount during a given period of time
Preferential Treatment Law
This term is mainly used during bankruptcy in which previous payments made can be summoned back to the debtor
Principal
This is the amount borrowed, minus any fees and/or interest.
Promissory Note
A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date
Proof of Debt
Refers to purchase orders, invoices, emails, contracts, text messages or other documents proving the amount your owed
Proof of Delivery
A method of confirming receipt of the goods supplied to the debtor, and that the products are in good condition.
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Q
R
Receiver
A person appointed by a secured creditor to take control of the debtor’s assets
Receivership
A procedure by which a creditor gains security against a debtor’s assets in order to obtain payment for the goods or services provided
Red Flags
Refers to tendencies debtors show such as broken promises, not returning emails/phone calls, or disputing invoices
Retainer
A sum of money paid prior to services rendered such as legal services or special collection circumstances
Return on Investment (ROI)
A comparison of the money earned (or lost) on an investment to the amount of money invested
Return of Product
Refers to a debtor sending back products or devices in order to reduce their outstanding past due amount
S
Secured Creditor
This is debt that you have collateral to back up or is documented properly in a signed agreement
Secured Creditor (NON)
This is a debt you have incurred but have no assets to back it up. This is true for majority of businesses in the United States
Settlement
A settlement refers to both parties agreeing on a lesser amount to be paid in order to satisfy a debt
Small Claims
Court procedure used for the recovery of debts with a value of less than $10,000.00 usd
Statute of Limitations
Each state has different "statute of limitations" which gives you a certain amount of time to collect monies owed to you
Statutory Demand
A formal notice requiring the debtor to pay an outstanding debt, either in instalments or in full, within 21 days. Failure to do so will lead to a winding-up petition
T
Trust Company
A large business; often associated with abusive practices and often used their size to exclude competition.
Terms and Conditions
The terms of trade that are agreed upon purchasing goods or services
Tendered Payment
A "tendered payment" is an offer of payment, typically money, to settle a debt or obligation, but it is not the actual payment itself.
U
Uncollectable
Refers to a debt being deemed as not collectable. Usually referred to by professional debtors
Uniform Commercial Code (UCC)
A standard set of business laws that regulate financial contracts. The Uniform Commercial Code has been adopted by most states in the U.S. The code itself has nine separate articles. Each article deals with separate aspects of banking and loans. The UCC better enabled lenders to loan money secured by the borrower’s personal property.
V
Viable Debt
A Debt deemed as "good" and has potential to be paid
W
Written Policy
a formal, often official document that outlines a group's (organization, government, etc.) rules, guidelines, or plans for specific situations or actions
X
Y
Year End
In accounting, "year-end" refers to the end of a company's accounting period, which is typically a 12-month period. It's a crucial time when businesses gather, review, and reconcile their financial information, creating year-end financial statements like the balance sheet, income statement, and cash flow statement.
YIELD
"yield" refers to the income generated by an investment, typically expressed as a percentage of the investment's value. It essentially represents the profit earned from an investment, whether through interest, dividends, or other forms of income. In collections it refers to amount placed compared to amount collected
Z
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