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If you’re a business owner or departmental manager who does any kind of collections activities, you’re already pursuing first party collections, though you may not have known it. First party collections means precisely that: attempting to collect on debt for your own company instead of sending your accounts to a third party agency. Any time you make a call asking to remit payment or send a past due notice you’re engaging in the practice of first party collections.

You’re considered the “first party” because you were involved in the original transaction, while the debtor is known as the “second party.” A “third party” doesn’t enter into it unless you hire a separate debt collection agency.

Third party collections are different from first party collections in a few ways. For one thing, there’s a lag in time from when a bill becomes past due to when a third party collector starts collecting, simply due to the exchange of files. Another difference is that third party collectors don’t have a personal relationship with the debtors, so they may not be cognizant of the need to remain on pleasant terms with them in the hopes of getting future business.

First party collections attempts are often seen as friendlier or more understanding than activity from third party collections agencies. Your client may rely on your service or product for his business to run, and if so he will be just as amenable to staying on good terms as you are.

Another advantage first party collections has is one that surprises most people-under first party collections you are not subject to the Fair Debt Collection Practices Act. Whether you’re the original lender or a subsidiary of it (some large companies operate their own collections agencies as subsidiaries for just this reason), you’re not considered a collector by law, which adds some flexibility to your debt collection. However, you must still abide by applicable state and federal laws.

Once a bill gets past due beyond 2-3 months, though, it’s usually time to turn it over to a third party agency or sell the debt. The ability to collect on past due amounts drops steeply after this time statistically, so rather than continuing collections actions in vain, you’re better off handing them over to professionals with more resources.

The most successful first party collections are done by dedicated collections professionals. Salespeople, accounting staff and business owners just aren’t as capable at collections because their attentions are scattered and collections is one of the least pleasant tasks they have to do.

Instead, if you’re insistent on first party collections, hire someone whose sole job is to do that, or if you’re large enough to support it, consider having a collections department or subsidiary. Dedicated collections professionals will know the best collection techniques, including how to find deadbeats, negotiating settlements or payment plans, and even disguising collections activity as audits. First party collections can be effective if you structure it the way a third party agency would.