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
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often outdated”.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
I wish you well.
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.