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What is a Collection Agency?

Accounts Receivable Assignment or AR Assignment

An accounts receivable assignment can be an agreement between a lending company and borrowing company, where the lender gets the right to collect the borrower’s accounts receivable, should they default on their loan. OR an accounts receivable assignment can be an agreement for a third party collection agency, like AAB, to collect your accounts receivable. AR is just the common abbreviation for accounts receivable.

It should be noted that a receivable is not sold or ownership transferred under an accounts receivable assignment. An assignment formally grants a collection agency the right to collect a receivable on your behalf. The other main factor is the terms and commissions contained in an accounts receivable assignment.

Accounts Receivable Assignment Terms

The assignment may limit an agency’s authorization to sue accounts on your behalf. This is often a standard term on an accounts receivable assignment. Usually the agency’s ability to sue is contingent on the facts justifying litigation and written approval from the Client prior to a suit being launched.

Another assignment term is the commission rate a collection agent will charge to collect your accounts receivable. If a Client has a mix of consumer and commercial accounts, then different rates could be applicable to different types of accounts.

A proper accounts receivable assignment should define when the collection agency will remit the net funds collected on your accounts. Special handling instructions for your accounts can also be included in an assignment. Reporting delinquent accounts to the credit bureaus is yet another example of terms that should be considered when negotiating an accounts receivable assignment.

AAB Accounts Receivable Assignment/Agreement

At AAB we consider the assignment process to be very important. A proper accounts receivable assignment or agreement clearly defines the rights and obligation of both parties. Everything is up front and the terms are understood on both sides. Each Client differs in some respect so this is the reason we don’t rely on a standard format for an accounts receivable assignment.

At AAB we aim to provide an AR assignment that is fair to both sides. Different types of accounts receivable require different combinations of debt collection services. When dealing with AAB you will be dealing with an AAB professional, who has over 20 years’ experience in the trenches, collecting accounts.

Get the ball rolling with a quick call with an AAB professional or request a free Quote for a fair cost effective accounts receivable assignment.
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