Sometimes a client wants a collection goal, but everything seems to be a secret. “Beat the other guy and don’t get me in trouble,” is not necessarily the best plan of attack.
This article will give you some suggestions on ways to set recovery goals and return more dollars to the bottom line in the process. Increasing collections is one of the best ways to increase your company’s bottom line.
Every agency should know the answer to the following questions, and they should sign a confidentiality agreement in advance (this also helps you to get the best possible pricing):
• How many dollars you expect to place monthly by division, product or total. What’s my opportunity?
• Average balance per account, by segment of business. How much effort can I afford to put forth on an account?
• Historic recovery rates of your best performers. What is my initial goal to exceed?
Net Recoveries and Other Evaluation Factors
Once the agency has provided the answers to these questions, it is time to get together and set some goals.
What percentage of recovery do you feel is realistic to expect? Recoveries will vary based on the age of the account at placement, demographics, balance and type of debt. Make sure your split of business is fair. Giving one agency the West Coast and another the East Coast provides built-in excuses.
Apples-to-apples is the best way, if possible, to evaluate your agencies. Professional handling, expertise, administrative efficiency and consistent effort are also key items that make the difference between great collection vendors versus average performers.
It is all about the agency’s commitment to treat you as special and go the extra mile. Every agency sales rep says he/she will treat you as special, but are your placements (agency opportunity) 3 percent or more of their total placements? You will get more attention if you are among their top 50 clients.
With regard to effort, every agency will collect the easy accounts (blind squirrel). Professional effort means collections without complaints. Expertise is knowledge of your industry, your debt, internal training, turnover and quality of staff.
Regular Communication
I have worked with many savvy creditors over the years. The successful ones tend to have a few things in common. The most important quality is communication.
They typically have regular meetings, teleconferences and even occasional face-to-face agency conferences.
They use these opportunities to explain their corporate vision, collection goals, and obtain buy-in from the vendors.
Nothing makes a collection agency executive more driven than to sit across the table from a competitor. At such a meeting, you should share masked results (without naming names).
Savvy creditors also update the results consistently and publish the updated analysis regularly so that every agency knows how they are performing in relation to the competition. Typically, the water level rises for everyone. The bottom performer will scurry to improve their results and your best agency will fight to maintain the first position.
10 Steps for Success
There are some great companies in the collection business and you only want great companies representing you. Following are 10 actions you can take now to obtain the highest possible return without complaints:
1. Have a conference call with your agencies. Ask them for an annual percentage goal for the coming year based on some expected placement amount, and track to that goal.
2. Give them some sort of bonus at the end of the period if they hit that goal. If they consistently miss your target and are low performers, reduce placements or move on.
3. Give them a goal for lower complaints and review complaints received, including listening to the debtor phone calls, if available.
4. Seed your placements periodically with a few bogus accounts at varying dollar values quarterly to make sure letters go out on time and phone calls
are being made. Have the contact information going back to someone on your staff who can track the activity in a spreadsheet. 5. Pay off a small account periodically to make sure the money is remitted properly and on time.
6. One way a dishonest agency will work the numbers is by billing you for direct payments that were never paid. Make sure you have a strong internal reconciliation process.
7. Encourage your agencies to provide you with feedback on your receivables and involve the collectors who handle your accounts. You can learn a lot from your agency about ways to improve internal procedures. I have often told clients that the best way to have quality control is to evaluate the customers who did not pay.
8. If your company has promotional items, send a few to the agency to distribute to their people. Get the agency collector on your team.
9. Run an agency contest periodically during tough months. Establish a champion-challenger program where you continually allocate business based on results.
10. Share information with your agency. Explain your vision and allow them to be a partner to your organization. Ask for their thoughts on new ideas and methods for success.
Tom Gillespie is President of Access Receivables, which has been designated a Certified Commercial Collection Agency by the International Association of Commercial Collectors, Inc. (IACC).
published July 19, 2023 by the Institute for Finance and Management – Click here to view >