Essential Debt Collection Glossary
Debt collection involves specialized terminology that can slow decision-making. This glossary clarifies the most common terms in commercial (B2B) collections—what they mean, why they matter, and how they appear in day-to-day workflows. Use it to align finance, sales, and leadership around a shared vocabulary and process. This material is for general information only and not legal advice; requirements vary by state and situation.
A–C
Accounts Receivable (A/R)
Money owed to your business for delivered goods/services but not yet paid.
Aging Report
A list of unpaid invoices grouped by how long they’ve been outstanding (e.g., 0–30, 31–60 days). Your roadmap for priorities.
Amicable Collections
Professional, non-legal outreach designed to resolve balances while preserving relationships.
Attorney Demand Letter
A formal letter from a law firm requesting payment and outlining next steps if unpaid.
Charge-Off
An accounting event where a creditor writes a debt off as unlikely to be collected. Collection efforts may continue.
Commercial Debt (B2B)
A business owes another business (vs. consumer/household debt).
Contingency Fee
“No recovery, no fee.” The agency’s compensation is a percentage of amounts collected.
Credit Policy
Your rules for extending credit (terms, deposits, limits). Strong policies reduce future collections.
Credit Memorandum (Credit Memo)
A document reducing the amount a customer owes (e.g., for returns or billing corrections).
Customer (Debtor/Account Debtor)
The business that owes the balance.
D–H
Demand Letter
A written request for payment specifying amount due and how to resolve.
Dispute
A debtor’s claim that all or part of a balance is incorrect. Requires documentation and timely response.
Dunning Notice
A sequence of increasingly firm payment reminders.
FDCPA (Fair Debt Collection Practices Act)
Federal consumer-debt law governing third-party collection conduct. While commercial collections differ, many agencies align practices to its spirit.
FOTI Message
A voicemail that satisfies disclosure requirements without revealing sensitive info to third parties.
Garnishment
Court-authorized withholding of funds (e.g., from bank accounts or wages) to satisfy a judgment—subject to state rules.
Goodwill Adjustment
A voluntary reduction or concession to preserve a valuable relationship.
Guaranty / Personal Guarantee
An individual or entity promises to pay if the primary debtor does not.
I–N
Interest (Contractual/Statutory)
Additional amount owed based on contract terms or applicable law.
Judgment
A court decision that a debtor owes a specific amount. Enables post-judgment remedies.
Judgment Lien
A lien recorded against a debtor’s property based on a judgment.
Levy
Court-approved seizure of assets (e.g., bank funds) to satisfy a judgment.
Lien
A legal claim on property as security for a debt.
Mediation
A facilitated settlement discussion led by a neutral third party.
Net Terms (e.g., Net 30)
Number of days a customer has to pay after invoice date.
Non-Sufficient Funds (NSF)
Returned payment due to inadequate funds.
O–R
Outreach Cadence
Structured schedule of contacts (letters, calls, emails) designed to resolve the debt efficiently.
Payment Plan
Installment agreement with clear dates, amounts, and consequences for missed payments.
PCI / HIPAA
Security/privacy frameworks relevant to handling payment data (PCI) or medical information (HIPAA) in specific industries.
Placement
Transferring an account to a third-party agency to collect.
PO (Purchase Order)
Buyer’s written authorization to purchase—often key evidence supporting an invoice.
POD (Proof of Delivery)
Documentation confirming goods/services were delivered or completed.
Promise to Pay (PTP)
A debtor’s commitment to pay by a specific date/amount; tracked for follow-through.
Re-Aging
Altering an account’s delinquency date. Inappropriate re-aging can be misleading—use with care per policy/law.
Right-Party Contact (RPC)
Confirmed communication with the correct decision-maker.
S–Z
Settlement
Creditor agrees to accept less than the full balance—often for immediate, guaranteed payment.
Skip Tracing
Research to locate a debtor or updated contact details.
Small Claims Court
A court for lower-dollar disputes with simplified procedures—limits vary by state.
SOL (Statute of Limitations)
Time limit for initiating legal action. Varies by state, contract type, and facts.
Stipulated/Consent Judgment
A judgment both parties agree to, usually as part of a settlement.
Suit Recommendation (Suit/No-Suit)
Agency/attorney opinion on whether a file is suitable for litigation.
UCC Filing (Uniform Commercial Code)
A public filing (UCC-1) securing a creditor’s interest in a debtor’s collateral.
Venue
The proper court/location for legal action.
Verification / Validation
Providing information to substantiate a debt upon request (context and requirements vary).
Writ of Execution
Court order authorizing enforcement actions (e.g., levy) after judgment.
Process & Reporting Terms
Account Manager
Primary contact managing your placed accounts and updates.
Audit Trail
Chronological record of contacts, documents, and actions on an account.
First-Contact Time
Speed from placement to initial contact—often correlated with recovery rates.
KPIs (Key Performance Indicators)
Metrics like recovery rate, time-to-resolution, promise-kept rate, dispute rate.
Milestone-Based Draw (Lending)
For rehab projects, funds released as work milestones are verified (relevant if you finance customers or projects).
Remittance
Collected funds sent to the creditor on a defined schedule.
Vendor Governance
Periodic review of agency/attorney performance, documentation quality, and outcomes.
Quick Callouts
Pro Tip: A “placement-ready” packet—contract/PO, invoices & ledger, POD, contact history—cuts cycle time and boosts recovery odds.
Good to Know: Recovery probability often drops sharply after 90 days past due. Many teams place at 60–90 days using set thresholds.
Did You Know? A signed SOW/PO plus delivery proof resolves a large share of B2B disputes faster than any script.
How Snap Debt Recovery Uses This Playbook
We run people-first, results-driven B2B collections across all 50 states. Expect disciplined outreach, transparent reporting, and optional attorney coordination through our affiliated network.
Disclaimer: This glossary is for general information only and is not legal advice. Consult qualified counsel for jurisdiction-specific questions.
Snap Recovery, Inc. does not offer any language translation services. You can find a Glossary of Commonly Used Debt Collection Terms translated in many languages by visiting NYC.gov glossary of terms.
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