Types of debt collection: Which one is right for your business?

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Debt collection is the process by which outstanding payments are recovered from clients who have overdue debts. As for the types of collection that a business can do, there are several; for example, preventive collection, administrative collection, extrajudicial collection, and judicial collection. But which one is appropriate for your organization? Below we provide more details!

What will you find in this text?

What is debt collection?

The two main types of debt collection

Types of collections according to your business

Preventive collection

Administrative collection

Extrajudicial collection

Judicial collection

What is debt collection?
What is debt collection ? The definition of debt collection addresses the process of collecting and recovering funds owed by individuals or entities, comprising a series of actions aimed at obtaining payment for outstanding financial obligations.

The objectives of debt collection include both the effective recovery of the buy whatsapp mobile number list and the maintenance of cordial relations with debtors, preserving the reputation and financial strength of the creditor entity.

In this process, different types of debtors can be identified , ranging from those who, due to temporary circumstances, have incurred delays in their payments to those who show persistent resistance to fulfilling their financial commitments.

It is essential that b2b or b2c collections (also known as Business Collections or Personal Collections ) are carried out in an ethical manner and in accordance with established regulations, avoiding abusive or coercive practices, and respecting the rights and dignity of debtors.

The two main types of debt collection: direct and outsourced
Now that you know what debt collection is and before telling you what types of debt collection you can choose for your business, you need to decide whether you will do direct or outsourced debt collection. Direct debt collection is the debt collection you do directly from customers who have debts with your business. To do this, you need to set up a debt collection department in your organization, which must be made up of debt collection specialists , who must have the necessary tools to optimize debt collection processes ; for example, automated debt collection management software .





Another option is to outsource debt collection management ; in this case, instead of setting up a debt collection department, what you should do is look for a strategic partner specialized in asset recovery. This solution is beneficial if you do not want to distract your team or use your company's resources on processes that are not part of your core business .

Types of collections according to your business
If you have decided that you are going to be in charge of debt collection for your business, you need to know what types of debt collection you can do. In this case, you need to know what preventive, administrative and extrajudicial debt collection is; which are part of the normal debt collection process ; in addition, there is judicial debt collection; which already involves hiring a legal team, since it is a process that takes place in the courts.