“They” say my child is easy. Perhaps they are right, and I am just whining right now but I love sleep.
I love sleep more than coffee, bbq and house of cards, combined. I never understood the true depth to my love for sleep until I had a child.
Ambitious folks we are, founder daddies and founder mommies, blindly ambitious perhaps. We seek to create and juggle two intersecting lives, the business and the family, in perfect harmony. If you are in it you will find no such harmony. If you are in it you know its damn tough and you need focus.
Laser like focus.
Without focus and determination you stack the cards against yourself in ways you can only understand when you supremely focused. I’m talking about one of those adderall fueled pre-mid term crunch sessions from college.
That is focus.
For those of you that struggle in this area listen up because what I am telling you is effective. If you are questioning getting started on your start-up you need to do some soul searching and some research on the woes of starting your own company. Main point: it aint easy folks…you gotta want it…really really bad. In my opinion, you have to start with YOU first, then the rest falls into place.
A couple things that helped me.
Sleep time for your baby= work time for you:
You have probably heard people talk about how important a schedule is to a baby. A schedule is double important to a parent for your sanity and ten times more important if you are starting a business.
Begin thinking about your next move/task before they go to sleep.
Work at night while they are asleep and forget about sleeping when they sleep during the day.Naps are a luxury you can’t afford, unless it is the day after the Super Bowl. Then take it, of course, every man has his limits.If you are lucky you may get 4 hours of real work done during the daytime, and then less as they get older.
Awake time for your baby= time to revisit the to-do list
If you aren’t a task oriented person it is time to adopt this mentality and live it. To manage all the little things you need to do it is crucial to start multiple to do lists.Don’t be like those waitresses that don’t write anything down and then screw up your burger order.
That is absurd.
Write it ALL down. Brushing your teeth and you thought of something you forgot, write it down. Laying in bed and realize that you forgot to pay a bill…write it down. This goes for personal and business, you may have been able to keep it together before a child but a lack of sleep, lack of free time and compounding stress will equate to you missing important businesspersonalchild milestones. Grocery list, house maintenance, business, personal, you get the idea. *I use the reminders app thru mac, any device I have with me I can update or add things quickly.
Equally important is removing stuff off the list. Why? It keeps you motivated. Sometimes if it is quiting time I will go through my list and review the tasks of the day and have a beer, preferably ice cold.
What is the point of all of this BS? To capitalize on every minute you can. Harness your time adequately and you can find a harmonious ying yang like balance.
Debt is uncomfortable for business owners. When is the last time you enjoyed talked about someone or some entity that owes you? In my experience it is close to impossible to discuss it without bringing emotion into the mix, even if you are the credit manager.
If you aren’t in business where you have deal with your books then think about it on a personal level.
Reason #1: No likes to talk about debt.
Debt is sticky.
Once you have to work harder than needed to get your funds your business relationship immediately becomes different, it’s human nature. Non-payment from anyone leaves a residue behind that is tough to shake.
While you can’t change the debtors (the folks that aren’t paying you) of the world but you can change how you manage your expectations, your communication, and the facilitation of payment.
Talk to others in your field and see how they handle their non paying customers.
Avoid leaving money on the table by trying harder to get ahold of the debtor and make something happen.
If you know yourself well enough to know that communication is not going to happen, then get help. In the form of an employee that can manage this ongoing issue or a collection agency that specializes in getting involved early.
Even the smallest balances can have lasting effects on any business and they can begin to compound before you know it. Timing paired with communication is a one two punch that keeps your books happy.
Reason #2: You.
If you think your debtor is the only party at fault for non payment you are wrong. The fact is that you granted that line of credit, that service, or that product and as such you are as much a part of this mistake as the debtor not paying. Once you adjust the scope of responsibility, then and only then will the cycle start working.
Every debtor is an opportunity to revisit your credit cycle and make tweeks. Arm yourself with more data, better data, more safe guards, or execute faster.
If your efforts are getting ignored internally then chances are things aren’t going to change in the next 15-30 days with you. If you have communication then you are on the right track but anything short of communication more than likely it is better off in the hands of pro armed with a scary letterhead.
And when it comes to the conversation after you pass them to third party don’t be shy.
No one likes explaining why they were forced to pass a client to collections, its a tough conversation all around. I have been there, it can be terrible. In the end the debtor is more to blame and frankly if you have them complaining you have them talking. More than half the time the hardest part is getting them on the phone. Find an arrangement that works, give the agency their dues, adjust their credit and think about the total credit cycle and move on.
The reality of the third party collections world is that it isn’t a huge fan of transparency. If you are outsourcing your receivables you may be one of the lucky creditors that is with a great agency but you wouldn’t even know it. Additionally, if you are on top of your third party reporting and watching ever dime, you may still only be with a good and not a great agency. It’s not your fault, because in the end nothing beats the apples to apples comparison, but more on that later.
Few mechanisms exist to aid you in your search and validation of a collection agency. Word of mouth, B.B.B, and various associations are all a good start. Nevertheless, the aids that are available don’t provide a clear picture as to what you really have. With the lack of meaningful data you are forced to piece all of this information together yourself. It is no wonder that most creditors don’t know if they got a fair shake or not, I know from my own anxiety.
Good vs. Great
Sadly not all collection agencies can be great, and while the majority are good, some can be downright awful as well. So what do you have? Our advice is to start with the numbers. Accreditation, compliance and your buddy’s thumbs up all have value but at the end of the day you need measurable results. The third party world can be viewed as a contact sport and just like most sports the difference between good and great can be something as minute as a percentage point here, or little bit of extra effort there.
Each agency has strengths and weaknesses, the key is finding out which strengths are a good fit for your business type. If your business is in a field that requires in depth knowledge of your businesses inner workings, then you need to target an agency with that industry knowledge. Furthermore, depending on your size of annual receivables, the size of the agency and the exposure to collection action that each debtor receives becomes a factor. Each creditor has its own unique needs and learning what separates your needs from other creditors in other industries is a good indication of how difficult it can be to find the right fit.
The honeymoon is over
So after trying out a new agency you decide to increase their workload. You measure the results a few months later and you pat yourself on the back after you see an increased recovery rate. Another six months goes by and the agency that was previously your dragon slayer is now not performing as before, things are slipping. What happened? To start, the end to the honeymoon phase is a completely normal thing to see. It’s human nature. Every collection agency knows that they need to prove themselves in the first couple quarters or they are out the door. Furthermore, it may also be likely the debt that you passed to them was different six months ago in a few different ways. A few different factors could have made that particular set easier to collect, placement type, age of debt, claim size, or seasonal volatility, etc. The only thing you can do for your own due diligence is start a dialogue with your third party and do your best to compare their efforts vs. other agencies. Start your discussion with a valid comparison.
A.R.M. agencies are cruise ships
Accounts receivable management at the debtor (or the folks who aren’t paying you) level is a relationship based activity. These relationships take shape in the form of on going daily pressure and a consistent presence. Meaning an agencies collectors build relationships, some good, and some bad, with each debtor to generate an outcome. I won’t spend a lot of time talking about the best practices of each agency because that is its own discussion but one thing is common amongst all agencies, time. Changes take time, you wont see the fruits of your labor immediately. Going back to our honeymooning agency, let’s say you start a dialogue about what you want to see, and then 60 days goes by and nothing has changed. You may be contemplating dropping that agency and vetting a new one. What you don’t see is that your reformed agency has changed its course based on your requests but it takes time to turn the ship. Give the changes time and you may be happy with the outcome. With that said, don’t make the mistake of setting it and then forgetting it.
We get a lot of questions about what separates the best agencies from everyone else. The answer is usually of summarization of the things mentioned above but the elite agencies out there separate themselves in the guidance category. Good agencies realize that your business is going to generate bad debt no matter what. Additionally, if they choose to help you achieve your goals vs. capitalizing on the easy pickings then I would say you have a good thing going. Guidance is a rare commodity and it can come in a lot of difference forms for each industry. A common tool used is an early placement letter that your in-house team can utilize early in the collections cycle; others can be as simple as access to collection best practices, guidance with larger or difficult accounts, or even credit protection.
Finding the right fit
Putting the recovery of your company’s bad debt in a third party’s hands can be a difficult decision. Free resources now exist to provide you with the transparency needed to make a sound decision at recoverity.com. You can now compare the rates of collection agencies nationwide for your particular outstanding bills in a few minutes.
What’s more is that you can learn a great deal from the each agencies reviews, so you can get a feel for how they did for other creditors (review portal launching Fall 2014). All reviews can be filtered by location and industry type providing you with a strong comparison to shop with.
Recoverity offers full transparency of collection agencies while providing creditors an “apples to apples” comparison in a confidential and secure portal.
Start on the right foot
It is crucial to provide transparency from the very first interaction with a potential agency. Forgetting crucial details about your receivables or what type of services you need can cause issues that may affect your recovery rate. For example, if you a portion of your current bad debt book is deceased or if only a portion of your debt is secured it is best to tell this information upfront, failing to do so wastes time and money for both parties.
If your agency is good they will listen to what your needs are and make recommendations based on what has worked for them in the past. For example if reaching your debtors with an early notice letter or skip tracing certain debtors is a service this particular agency offers, then keep digging. Set rules of engagement for each situation so that you know how and when each agency will handle certain debtors based on age, size and type of debt. It may not make sense to send an early notice letter to older debt or within a certain claim size. Be clear about your expectations and what those services will cost you.
Track their progress
The most important tool any creditor has is the reports that an agency sends periodically. Look for key terms like recovery rate on each report and see how they compare from month to month and year to year.
If you are unhappy with the result from a given agency, speak up. This is where having a solid foundation from the beginning comes in huge. If your current agency quoted you a XX% historical recovery rate during their sales process for debt that is similar to yours and they have not gotten you reasonably close to that mark tell them you are looking for more. Enrolling with a collection agency doesn’t mean that everything is now up to them to manage, open up a dialogue and give them time to make adjustments.
Simplify the process
A lot of times what is hurting the recovery rate of a given bad debt book is on the creditor side. Misinformation, delayed information, or changing balances eats up a lot of time on the agency side. Make sure you are sending data efficiently, effectively and follow back up after changes have been made.
Every agency handles the importing of data differently. For some CSV or Excel is fine, while others have online portals that require getting used to. In the end, the process should be simple and easy so that you can delegate or automate these tasks as needed.
If you have a lot of moving parts in your current workflow perhaps a full integration is necessary. Find out if integration is possible with your current agency and how it would work. Integration can be costly on both ends and an ROI analysis should be done to verify if it makes sense.
Tell others about your experience
Agencies are no different than any other businesses; referrals make a huge difference for you and for them. Not only can collection agencies serve as a vital link to new business for you but also your recommendation serves to spread the culture of a good collection agency. Building and sustaining a collection agency that is compliant and meets customer’s demands doesn’t just happen, it takes a great deal of work. Testimonials serve to enlighten the next potential creditor that this agency is legitimate, focused and worth a higher fee. Put simply, the debt management industry has a spectrum of different experience and business ethics levels, therefore a good agency is worth their weight in gold.
Miguel Leman is the Managing partner of recoverity.com, where creditors from any industry can compare rates and industry experience of the nations best collections agencies at no cost.