Collection agencies suffer in slow times, too

You'd think that a bum economy would mean good times in the collection industry. But, like me, you'd be wrong.

"Our business cycles with the rest of the economy," explains Dino Romano, president of Romano & Associates, LLC, a Naperville collection agency. "When companies are making fewer sales, there are fewer outstanding invoices for us to collect. The sheer number of outstanding debts has gone down."

Slow times also alter the way many businesses look at collections. For one thing, Romano says, in-house employees often have less to do - and are assigned to collection problems in part to help fill their days. For another, many businesses are more willing to offer - and accept - payment plans.

"If there is an outstanding balance of $1,000 and I collect it all, I'll get $200 as a fee," Romano says. Although that means the creditor company is collecting 80 percent of an unpaid bill, today many businesses start the collections process by offering their customers a $900 settlement, Romano says. It may take a little longer, "but they'll get an 'extra' $100."

Interestingly, Romano offers training for internal accounts receivables departments - and is willing to share some tips for businesses looking to speed up customer payments.

The first tip, surprisingly, is to make certain the customer is invoiced. Although it seems that sending an invoice should be a given, Romano says "It's not unusual to find that invoices aren't going out. You need to review internal procedures."

You probably should tighten your credit policies as well.

"You'll know earlier if there's a problem" if, for example, you change your billing and payment process from net 30 days to net 10, Romano says - or 30 days rather than 60.

You also may want to require more upfront money, especially if whatever you're selling involves a lengthy lead time.

Don't be too quick to send past due payments to a collection agency, the collection agency guy says.

"Trying to recover (money due) internally can be a solid business move.

Use the phone, not letters, in the collection process.

"If letters collected money, I wouldn't be in business," Romano says.

If an initial phone call and follow-up from an employee fail to produce dollars, the business owner should make the next call.

"You want a different voice asking for the money," Romano explains. "Besides," he adds, "people hate doing collection calls. The owner is likely to be more extroverted (or effective)."

The fact that the owner is making a collection call tends to raise the level of importance of the situation, too.

Be more open to payment plans and settlements.

"Understand that 100 percent collection often is not possible," Romano says. "Getting the money you're due in one or two payments is better than not getting anything at all."

Questions, comments to Jim Kendall, JKendall@121MarketingResources.com.

© 2008 121 Marketing Resources, Inc.