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Published Articles by David Balovich

Title: Improve Your Collection Agency's Results
Published in: Creditworthy News
Date: 10/29/03

The most common complaints we hear about collection agencies is that they “don’t do a very good job” or “they don’t collect all the money that is owed”. It has always been our position that if the collection agency collects only one dollar more then we have, then they have collected one hundred percent, 100% more then we did. In our opinion that is an excellent job.

Credit professionals have a responsibility not only to themselves and the companies they represent but also to the third party collectors who they assign their “problem accounts” to. That responsibility is to improve collectibility so that regardless of who is dealing with the “problem customer” that person has the advantage.

If one thinks about it, at every stage of the credit/collection process collectibility can be improved upon before a problem exists.

For example, every collection professional responsible for establishing credit availability for a customer should periodically update the information base about that particular customer. According to Bill Zoltan President of Commercial Recovery Bureau, Inc., a commercial recovery agency in Dallas, “the majority of claims we receive in our office have files where the credit applications are usually 3-5 years old and contain information that is often outdated”. Bill continues, “This delays the actual collection process because we either have to obtain new information or wait for our client to provide updated information, meanwhile company assets are shrinking”.

Another opportunity to achieve collectibility is when an established customer wants to increase their credit availability. There should be a “quid pro quo” as our friends in the legal community say. When a credit line increase is being requested or a substantial period of time has elapsed since credit was originally applied for, this is the opportunity for the credit professional to ask for new information or security.

Since the introduction of Article Nine of the Uniform Commercial Code, banks and other financial institutions have vigorously sought and obtained perfected security interests in all of a debtor’s assets. Usually, they take everything so there is little, if anything at all, left for trade creditors unless the trade creditor was in a position to perfect a Purchase Money Security Interest. In most cases, where creditors had that opportunity, they neglected to do so. In these cases the only opportunity that may be left is action on a personal guaranty, which could be valuable. Unfortunately Bill reports, “the majority of guarantees that do exist are signed by persons no longer with the company who have sold their interests in the firm”. Credit professionals not only need to create good files but also insure that the information contained in those files is accurate and current.

Maintaining good records can enhance every customer at every stage during the collection process. Each time a customer promises payment but is unable to pay, provides the credit professional the opportunity to ask for additional assurance of performance. In fact, readers may recall a previous article we devoted to “adequate assurance of performance” under Article Two of the Uniform Commercial Code. Each time a customer promises payment or admits they owe the debt but is unable to pay, constitutes a piece of information that, when properly documented in the collection notes (date and time of day), provides the opportunity to treat future excuses for non-payment as without merit.

Credit professionals should always be aware that every time they deal with the customer, regardless of who the customer is, they are dealing with a prospective debtor. They should use this opportunity to enhance their information, security and collectibility of a future “collection problem”.

By doing so, they are assisting their collection agency in “doing an outstanding job” and “collecting all the money”.

I wish you well.

This information is provided as information only and not legal advice. Legal advice should be obtained from a competent, licensed attorney, in good standing with the state bar association.

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