What is the primary function of a collection agency in accounts receivable?

The primary function of a collection agency in accounts receivable is to recover outstanding debts when internal collections have failed. Once a business has made significant efforts to collect on overdue accounts and those efforts have not resulted in payment, involving a collection agency becomes necessary. These agencies specialize in debt recovery and employ various strategies to pursue and negotiate payments from individuals or businesses that owe money. They have the resources, expertise, and legal knowledge to handle different situations effectively, which increases the likelihood of retrieving owed amounts that a company may otherwise lose.

The other options represent roles that are not primary functions of a collection agency. Providing financial advice is typically the domain of financial advisors or consultants. Offering discounts for early payments is a strategy often used by creditors to encourage prompt payment but is not related to the collection agency's role. Managing customer service inquiries generally falls within the function of a company’s support or customer service department, rather than a collection agency focused on recovering debts.