Commercial Collections State of the Union
In the current recovering economy, focusing on credit and collections has become increasingly important to ensure a company’s success — and survival.
By John E. Yursha
Desperate times call for desperate measures. In today’s economic climate, commercial businesses need to start thinking outside the box to reduce risk and increase days sales outstanding (DSO). Although the government bailout program has produced significant results for financial institutions, unfortunately, many commercial businesses have seen the trickle down effect in regard to loans and funding to get through these troubled times.
What that basically means is we are in “survival mode.” Therefore, the credit and collections function of every business has become even more important to its survival. An important extension of every credit and collections department is its commercial collection agency. If these two entities can work well in conjunction, this can be a powerful union in the attempt to increase bottom line.
Let’s look at the facts: Bankruptcies and closures of commercial entities are on the rise. Business bankruptcies have increased from 43,546 in 20081 to 89,4022 in 2009. This increase seems to have carried over through 2010 and is continuing into 2011.
Business closures seem to be on the rise, as well. From the period of 2004 through 2008, here are the stats:
This amounts to an annual turn- over of about 10 percent for entry and 10 percent for exit.
STARTS AND CLOSURES OF EMPLOYER FIRMS, 2004-20083
CATEGORY 2004 2005 2006 2007 2008
BIRTHS 628,917 644,122 670,058 663,100 627,200
CLOSURES 541,047 565,745 599,333 571,300 595,600
Often, a commercial collection agency cannot be all things to all people. Therefore, an agency may expect some flexibility on the end of In this economic downfall, many credit and collection executives are getting back to basics.
Nearly six out of 10 finance executives expect revenues to stay flat or actually decline in the coming year4.
As many executives predict little to no growth, the credit and collections functions of most companies have become increasingly important to its survival. This means becoming your collection process and increase the bottom line.
The most important ally a credit and collection executive may have is a commercial collection agency.
A good agency will assist with not only the recovery of lost revenue — but also will update the credit and collection professional on industry trends; provide training for collectors; assist with the improvement of policy and procedure and provide valuable the client as well.
Commercial collection agencies may also offer additional resources to properly facilitate a creditor’s needs. A valuable asset to the creditor may be referral to an industry credit group. Also, a good commercial agency may be able to assist in reviewing your current policies and procedures in addition information to providing training for the collection staff.
This process may only assist the commercial collection agency in recovery of funds once an account is placed for collections. A good policy will often place the account in the hands of the agency when recovery is still attainable.
As a result, a well prepared creditor may expect better results from the collection agency. Having the proper documentation, history and understanding of the creditor is often the difference between a successful collection — and uncollected funds.
John Yursha is president of Commercial Recovery Group, Inc. of Dover, Delaware. He is currently serving as president
of the International Association
of Commercial Collectors (IACC).
For more information, please contact the IACC at:
4040 West 70th St. Minneapolis, MN 55435
Phone: (952) 925-0760
E-mail: iacc@commercialcollector.com
1The Federal Judiciary, www.uscourts.gov
22- SBA Office of Advocacy. www.sba.gov
3SBA Office of Advocacy, www.sba.gov
4November 2008 CFO Publishing
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