Credit control and collections

Last updated November 20266 sectionsabout 6 min read

Key takeaways

Collections is where earlier credit decisions are converted into cash: however well credit was granted, liquidity and profitability depend on collecting what is owed.
Centralised collections give a consistent process but less local and relationship knowledge; decentralised collections sit closer to the customer but are less consistent; larger Kenyan banks and SACCOs often run a hybrid of the two.
The collection officer's dual objective is to maximise recovery while preserving the customer relationship where it still has value, which is why collections is a distinct discipline from legal recovery.
Consumer credit runs shorter, standardised reminder cycles; trade credit follows invoice terms with a more negotiated approach; export credit cycles are longer, document-dependent and complicated by jurisdiction and currency.
Manual collection suits high-value or complex accounts, while automated, system-triggered reminders at days-past-due milestones suit high-volume, lower-value consumer portfolios.

Why collections matter

Collections is where credit management's earlier decisions (extending credit, introduced in CCP Credit Management) are actually converted into cash. However well a credit decision was made, an organisation's liquidity and profitability ultimately depend on collecting what it is owed, poor collection performance can undo the value of even excellent credit-granting decisions.

Organisational structure

Centralised collections

One dedicated unit handles collections across the organisation, consistent process but less local/relationship knowledge.

Decentralised collections

Collections handled within business units or branches, closer to the customer relationship but less consistent practice.

Hybrid structures

Common in larger Kenyan banks and SACCOs: a centralised early-stage collections/call-centre function, escalating to relationship managers or a specialist recoveries unit for larger or more complex accounts.

The collection officer's role

The collection officer's core objective is maximising recovery while preserving the customer relationship where that relationship still has value, a genuinely different mandate from pure enforcement, which is why collections is typically organised as a distinct discipline from legal recovery (developed fully in the Debt Recovery Management paper).

The collection cycle

Consumer credit

Typically shorter cycles, standardised reminders (SMS, call, letter) escalating on a fixed timetable, common for Kenyan bank personal loans, mobile lending apps, and SACCO loans.

Trade credit

Business-to-business, cycles tied to invoice terms, often with a relationship-based, more negotiated approach given the ongoing commercial relationship at stake.

Export credit

Cross-border cycles, longer and more document-dependent (see the chapter on documentary collections), complicated by jurisdictional and currency factors.

Collection skills and attitudes

Persistence without aggression
Active listening to genuinely understand a debtor's circumstances
Emotional resilience, since collection work regularly involves difficult conversations
Sound judgement on when to escalate versus when to continue negotiating

Steps in collecting a debt

Manual process

Individually reviewed accounts, personalised calls and letters, resource-intensive but suited to high-value or complex accounts.

Automated process

System-triggered reminders (SMS, automated calls, email) at defined days-past-due milestones, standard for high-volume, lower-value consumer portfolios, e.g. Kenyan digital lending apps that auto-trigger SMS reminders the day a repayment is missed.

Exam tip

The collection officer's dual objective (maximise recovery, preserve relationship where valuable) is the paper's organising principle, almost every later chapter's techniques exist to serve one or both of these goals, keep asking which one a given technique is optimising for.

Self-check

(a) Distinguish between centralised and decentralised collection structures, and explain why a hybrid structure is common in Kenyan banks and SACCOs. (5 marks)

(b) State the collection officer's dual objective and explain why it differs from a purely enforcement-focused role. (4 marks)

(d) Distinguish between manual and automated debt-collection processes, citing a Kenyan example of each. (5 marks)

Show worked answer

(a) Centralised collections concentrate the function in one dedicated unit, giving consistent process but less local/relationship knowledge; decentralised collections are handled within business units or branches, closer to the customer relationship but less consistent in practice. A hybrid structure, common in larger Kenyan banks and SACCOs, combines a centralised early-stage call-centre function for high-volume, low-value accounts with escalation to relationship managers or a specialist recoveries unit for larger or more complex accounts, capturing the efficiency of centralisation without losing relationship-based judgement where it matters most. (5 marks)

(b) The collection officer's core objective is maximising recovery while preserving the customer relationship where that relationship still has value. This differs from pure enforcement because enforcement treats the relationship as already lost and pursues recovery through the courts or other formal mechanisms, whereas collections seeks to recover the debt while the account may still be salvageable as an ongoing customer relationship, which is why collections is organised as a distinct discipline from legal recovery. (4 marks)

(c) Consumer credit typically follows shorter, standardised cycles with reminders (SMS, call, letter) escalating on a fixed timetable, common for Kenyan bank personal loans, mobile lending apps and SACCO loans. Trade credit is business-to-business, with cycles tied to invoice terms and a more relationship-based, negotiated approach given the ongoing commercial relationship at stake. Export credit is cross-border, with longer, more document-dependent cycles complicated by jurisdictional and currency factors. (6 marks)

(d) A manual process involves individually reviewed accounts with personalised calls and letters, resource-intensive but suited to high-value or complex accounts, for example a relationship manager personally calling a large corporate borrower in arrears. An automated process uses system-triggered reminders at defined days-past-due milestones, standard for high-volume, lower-value consumer portfolios, for example a Kenyan digital lending app auto-triggering an SMS reminder the day a repayment is missed. (5 marks)