What Is a Collection Order?

Malcolm Tatum

A collection order is a type of document in which an attempt to promote the tendering of a payment or the deliverance of some sort of information is made. Depending on the exact purpose of the document, it may be focused on urging payment of balances past due, or be a notice of some pending action that will be taken in order to complete an order or to settle a transaction in full. While a collection order is often associated with an attempt to collect a debt, the term may also refer to internal documents prepared by different types of companies and used to transfer information within a financial or other type of institution.

Collection orders may be issued on a past due account.
Collection orders may be issued on a past due account.

When the collection order is in the form of a collection letter, or a letter of collection, the text of the document will usually advise a debtor that a payment on an open account is past due, and urge the debtor to submit a payment. Companies often use this form of collection order when outstanding invoices age over a certain number of days after issue, with a practice of issuing the orders as reminders at 45, 60, and 90 days after issue. The exact content of the collection order will vary, depending on the amount of time passed since the last payment was received. In some instances, the content of the letter may also include instructions on how to contact the creditor and make arrangements for paying off the past due balance.

An alternative form of the collection order has to do with the transmission of data or funds within a company organization. For example, a financial institution may use a form designated as a collection order as the means of documenting the flow of receipts or payable amounts through the institution’s system. Depending on the type of transactions involved, the detail found on the order may help to maintain exact records of postings that involve disbursements as well as any funds transferred between accounts.

With any type of collection order, the idea is to expedite the collection of some sort of data or funds. Typically, the preparation of this type of document must be done in accordance with governmental regulations that apply in the jurisdiction in which the issuer is located. This is especially true for companies attempting to collect payments on past due invoices as well as financial institutions that are required to document all transactions that occur within the structure of those institutions.

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