Collection Agencies Provide Solutions During an Economic Crisis

With recent economic developments, commercial collection agencies have become a necessary part of any efficient accounts receivable department. The trickle down effects of the current economic crisis will be felt for next several years as consumers struggle to regain financial stability. It is of utmost importance that manufacturers protect themselves by utilizing the best and most cost effective collection practices possible. Often, outsourcing past due and delinquent accounts can be nerve racking for any treasurer or controller. Many top financial executives earned their position through carefully monitoring their companies receivables and resolving bad accounts.

But outsourcing delinquent or past due accounts is just the same as outsourcing any other aspect of a business. If there is an entity that is highly skilled, cost effective, and can increase revenue, it is the responsibility of any executive to at least explore the possibility of partnering. For instance, would you want your full time employees designing and implementing your phone system? Unless you were a telecom company, of course you wouldn't! There is really no difference between outsourcing common things like IT and PR and outsourcing receivables. Bad debt is no longer a infrequent problem, but rather has become a part of life. Especially within the medical device industry, which relies on hospitals across the world for a majority of its business. As the number of unemployed grows, so will the number of uninsured. This means that a hospitals revenue will be hit hard, as many patients that are uninsured do not pay. Therefore, many device manufacturers will see their receivables go from 30 to 60 days, which can cripple even a large multinational corporation.

Collections

It is important to note that there is a distinct difference between commercial collections and retail collections. Retail collections are the firms that everyone dreads hearing from. They focus on individuals who have fallen behind or have not paid on credit extended to them. Think of the repo man. While necessary, they tend to be more like a trash collector, going after the worst and dirtiest accounts. Commercial collections on the other hand is a totally different ball game. Commercial collections is the process of recovering money from a business. There is totally different set of rules that commercial collectors must follow, and often the debtor they are collecting from is still doing business with the client who placed the account. Therefore, a commercial collector has to be adept at not upsetting a debtor while still managing to recover the money owed. This is a bit of a high wire act. Finding just the right balance can prove quite difficult, and therefore should be left in the hands of a professional.

The most important thing when searching for a reliable commercial collection firm is of course money. What kind of rate do they offer? Are there any upfront costs? Next would be their success rate. Every collection firm tracks its success rate very closely and should be able to give at least a few referrals. Also of importance is their ability to collect internationally. There are only a handful of agencies within the U.S. that can collect worldwide. The reason for this is that collections are handled very differently in some parts of the world. Often those areas tend to be the most difficult. For instance, Italy has become known as one of the most difficult regions. And when one thinks about the Italian lifestyle, it is not hard to imagine. Honestly, what would you rather do, enjoy fine food and wine while basking in the Tuscan sun, or make sure that your company gets its invoice out on time? Another factor that plays into the high DSO (date of sale outstanding) in Italy is the way in which the government is set up. Since all hospitals are publicly owned, bureaucracy can hamper budgets and not allow invoices to be paid for months.

In a perfect world, everyone would pay their bills on time. Unfortunately, we do not live in such a place. It is important that companies protect themselves from a "domino" effect by safe guarding their receivables. It is best that the difficult task of getting a debtor to pay on time be handled by a professional agency that proves to be not only cost effective, but one that can walk the "tight rope". Financial executives most remove whatever negative thoughts the have regarding collection agencies and see them for what they are; a valuable tool that can safeguard their companies cash flow through tough economic times.

Collection Agencies Provide Solutions During an Economic Crisis

Matt Macy is collections expert with a great deal of experience within the commercial collections industry. Feel free to contact him at mmacy@abna.us with any questions/concerns you may have.