3JM Company Inc.

3JM Profile
Credit Dynamics
Published Articles
Related Site
For More Info
Tel: 214-914-1311

Published Articles by David Balovich

Title: Are We Headed Toward Extinction?
Published in: Creditworthy News
Date: 6/1/07

A recent article began “Engaging the services of a commercial collection company is about safeguarding the assets of a company”. What caught our attention was it was not talking about a commercial collection agency where one would assign past due accounts but rather outsourcing the entire collection function. The article was actually a press release by a large credit insurer. The press release included the following statement “many companies – whether large or small – do not have the staff with the necessary expertise to effectively manage the commercial collections function”.


Has something changed that commercial business can no longer effectively manage its own receivables? We know of several concerns that think they are doing a fine job and their portfolios reflect that opinion.

We often get calls from commercial credit department managers bemoaning the fact that there is a lack of experienced credit professionals in the market place. Although experience counts for something one has to realize that the experienced credit professional also brings a sufficient amount of baggage with them. Many of us have experienced all too often upon hiring an experienced credit professional the refrain “Well when I was at Amalgamated we did it this way”.

The fundamentals of credit and collections like those of any other profession can be taught. What cannot be taught are personality and character attributes. What cannot be taught is company culture. Undeniably, one of the outstanding U.S. companies is Southwest Airlines. Southwest is renowned for their employer – employee - customer relations. One of the attributes that contributes to Southwest’s success is that they do not focus on the position they are looking to fill as much as the individual who they are looking to fill the position. That person has to have the ability to communicate, get along with others and most importantly have a work ethic that is compatible with the Southwest culture. Often is the case, Southwest will hire an individual who does not have experience but does have the character, attitude and work ethic that Southwest is looking for. Once hired, Southwest trains the individual to perform the job – the way Southwest expects it to be done. Southwest understands that once you have hired the right individual training is the easy part. Too often we hire people with experience who are not compatible with our organization, employees or customers. They do not fit into our organizations culture. You can teach people to do the job but you can’t change personality or character.

We have heard and read elsewhere that credit departments need members with specific skill sets to achieve results but that most credit departments are staffed with “generalists”. These are people who know how to do a little bit of everything but are not skilled in any particular task. In many instances these people possess identical skills and do not compliment each other. A properly staffed department is one where first and foremost the people compliment each other as individuals. This means their personalities are compatible; they get along not only with each other but also with both internal and external customers. Secondly, they possess skills that compliment each other. The most efficient way to achieve this is to first hire the right individual and then provide the training.


The article continued; “By using an established provider of accounts receivable management, a company can keep its internal credit management staff focused on the function for which it is trained”. Huh? We had to read that several times to make certain what we read is what they wrote. The function of credit is to support the organization and more specifically the sales department. Credit was never intended to be a line function. It is a staff function created to support sales. Credit, in many venues, continues to be promoted as a function of finance and it is not. You do not need credit to sell your product or service if it is recognized as having quality and reliability. Too often today the credit function is being promoted as a line function because quality no longer is a priority and it is credit that is being sold and credit professionals are being encouraged to abandon the principles of credit; character, capacity and capital to become more engaged in non-credit activities. If the credit management team is not being trained in investigation, risk analysis, collections, legalities and customer relations what are they being trained in?

One of the ways to support sales is not only through investigation, risk analysis and due diligence but also developing a relationship with the customer. It’s relationships that produce payments from customers during downturns in the economy and/or industry.

We have heard credit professionals (?) describe collections as a “low value” function. When did the functions of credit and collections fall into value categories and and who determined whether they were high or low? Collections is and should be the primary source of the organizations cash flow and not delegated to outsiders. Outsiders do not have equity in our receivables and are not concerned with the continuing relationship between seller and buyer. Their focus is on producing results for their organization but at whose expense? Collections is more than sitting in front of a computer screen eight hours a day dialing for dollars. It involves gathering and updating information, understanding the customers business, customer visits, when to contact the customer for payment and knowing the key personnel. When we outsource the functions of the credit department to outsiders we no longer have a functional credit department and thus we are no longer credit managers as there is nothing left for us to do as we have delegated our responsibilities. 

There are very few differences today between consumer and commercial credit. Technologies, attitudes, legislation and fulfilling customer demands has contributed to merging the two so that it has become difficult, in some cases, to determine if we are involved in a consumer or a commercial transaction. However, one of the significant differences is that commercial credit departments, in spite of technology and legislation, continues to maintain a relationship with the customer that assists the sales department in obtaining new customers and maintaining a profitable customer base.

Commercial credit is approaching a crossroad. The question is which way will it turn. If it follows its sibling, consumer credit, then it will fade away to massive call centers in places like Nevada, South Dakota and Iowa. If it turns in the opposite direction it continues to be an integral part of its organization supporting sales and contributing to the organizations profitability. Which way are you planning to turn your organization? 

I wish you well.  

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.  

This site is copyrighted (C) by 3JM Company Inc., Lake Dallas, Tx
Website by Creditworthy Co.