Change

Any change, even a change for the better, is always accompanied by drawbacks and discomforts. - Arnold Bennett

I think we can all agree that everything changes? Life changes, jobs change, the economy changes every day, and our approach to problems has to change. That last thing is what I want to address today. Our approach to the problems that arise in regard to credit and collections and the drawbacks and discomforts that may arise.

When I first entered the collections industry six years ago, things were much different. But as I stated above, things change. Back then, it was very common to have a collector recover accounts that were several months or years old. Now though, even with all of the improvements in technology and skip-tracing, that is very rare. Because of the changes in the economy, when a business closes it's not so much that people are trying to protect their assets like it once was. Now if they are out of business it is likely because they have lost or spent everything they have trying to stay open. If they are out of business, they are probably flat broke.

Which brings me to today's point. In this ever-changing economy, you can not operate as you always have. Where we may have collected accounts that were several years old in the past, now it is becoming more and more rare to collect accounts that are several months old. Today's economy requires a much more pro-active approach to collections. Your action has to begin when accounts reach your thirty-day column. You cannot be lax about sending past-due notices and requiring that your A/R staff know exactly why every account is late. Stay informed. If an account is past thirty days you need to know why. That way you can have your next action planned. Who needs a past-due notice? Who needs a call? Who needs a demand for payment? And finally, who needs to be placed for collection? I know it may seem like a negative or cynical approach, but desperate times call for desperate measures. If you don't take action first your reaction might be too late!

We know that even as the economy changes, it also may become harder for you to convince yourself or the "powers that be" to take the next step, and spend the money that it takes to hire a service like ours to recover those outstanding accounts. That is why we offer a much lower cost solution and we only work on a contingency basis (If we aren't able to collect, it costs you nothing). Our rates are lower than most of our competition. In fact, the only service with lower rates may be so-called "letter writing agencies". We may even be competitive with their rates, and your customers don't need another letter. What they need is the aggressive yet professional approach to collections that we employ. We can salvage your relationship with the customer AND collect your money. Call or e-mail me at (800)313-9611 Ext. 103 or neil@hamiltonandmonroe.com.

Happy Monday!

Foresight

Henry R. Luce said, "Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight." So let's talk today about foresight in respect to credit and collections or accounts receivable.

If you are a regular reader, then you may be starting to realize that I "harp" or "preach" about having a plan and sticking to it quite a bit. Here's why; If Benjamin Franklin was right and a failure to plan is a plan for failure, then I would have to say that if you plan and still fail, your failure could be because you deviate from your plan. Yes business is an exercise in foresight, but you cannot forsee everything. That is why there has to be controls in place for those situations that are not forseen. There is no way of knowing who will and will not pay, for sure. Yes, we can look at trends and credit reports, check credit referrences, etc. What about that company that has been a good paying customer of your for years, but because of a quirk in the economy they are suddenly facing bankruptcy?

These are the types of situations that a good plan can help you avoid much of the time. If your A/R policy dictates that every customer that goes 30 days past-due gets a call and a copy of the invoice stamped "past-due", then just about all of your customers will have an opportunity to see this. There will be the occasional lost invoice, minor discrepancy, or price dispute that will cause most of your customers to have an invoice go past 30 days, it just happens. If your customer has been "trained" by your policy, it will never be a big shock when they see this. Also, if you follow your plan, it will help you snoop out the larger problems. No one wants to be surprised with a bankruptcy notice from one of their late customers. Those calls should be seen as "fact-finding" missions to help you determine (or foresee) what is happening with your receivable item. Following your plan makes it less personal, and more policy.

Foresight will get you so far, but a good plan will help you search out the unforeseen!

Never Lose Money!

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1." -
Warren Buffett

A lot can be said for simple advise. I had an uncle that frequently talked about money, and would give simple advice. He said, "Son your income isn't the problem, it's your outgo! If you have one less penny coming in than you have going out, you are in trouble". I love people that can simplify life and business!

Buffet's quote above while practically impossible, is at least a good mindset. I will never understand businesses that simply write off their bad debt without at least trying to recover it. It's like throwing money away with no thought. If you aren't going to at least try to recover the money, why even bother getting a credit application or setting terms?

In speaking with clients and potential clients, I "preach" a lot about having set, clear-cut, policies when it comes to credit and collections. Start with a solid credit application, set clear terms (expectations), and follow through. When your customer doesn't honor your terms and you do nothing, you may as well throw you credit and collection policy out with the invoice that you sent that customer. They are equally useless!

Credit and collections policy can be likened to disciplining your children: If all you do is issue empty threats, sooner or later they are going to learn that you do not mean what you say. You will have nothing but unruly "children" (customers or debtors) on your hand! Your credit policy becomes an empty threat. Set a policy and stick to it!

Which brings me to my ultimate point: we want to be a partof or an extension of your collection policy. Sometimes a/r personnel see us as a threat to their job. Our goal isn't to replace them but to step in and help after they have exhausted their internal efforts, as part of your policy. Once you determine that you have a debtor on your hands (somewhere between 90-120 days past-due), real outside pressure needs to be applied. Put our aggressive yet professional collectors to work for you now, before you lose that money entirely! You have to at least try to never lose money!

Neil's rule #1: At least try not to lose money; Rule #2: If you don't take action, your aren't trying; Rule # 3: If you have as much money as Buffett, retire to your own personal island and give advice about not losing money! Have a GREAT week!

Customer Complaints

As you may or may not know, I am part-owner of a commercial collection agency. Sounds fun, right? Well, just like whatever job, career, business, ball-and-chain, etc. that you have chosen, this presents it's own unique set of "challenges".

To lay a background for anyone reading this that may not know exactly what it is that a commercial collection agency does, we collect from businesses that do not pay their bills. This is completely different from "Joe Blow" down the street that didn't pay for his Yugo. This involves businesses. For example: Business X sells widgets retail to the general public. In order for them to be able to do that, they have to go find a widget manufacturer that will sell to them wholesale so they will have widgets to sell. Either a widget salesman approaches them, or they call the "sales hot line" of said widget manufacturer and agree to buy an amount of widgets. This usually involves a credit application of some sort, agreed upon terms of payment, and a delivery schedule of some sort. For our example let's say they agree on a quantity and a price and are given net30 terms. This means that the manufacturer is shipping them the widgets and the customer has 30 days to pay before interest charges start piling up. If at somewhere between 90 and 180 days, the widgets still aren't paid for, the manufacturer just might call someone like me to help them collect the money that is due. This is different from the "Joe Blow" scenario above in at least two ways: 1) This is a company, not an individual, and; 2) This is unsecured debt (The manufacturer cannot repossess the widgets, it is also likely that they have been resold by now as well).

Enter the commercial collection agency (In this case, Hamilton & Monroe): Our collector makes the first call during which they ask some pretty direct questions in order to determine their side of the situation, while making it clear that at this point we represent the client and have every reason to believe that they are right. After-all we do work for them.

Questions that we might ask at this point:

• Are you aware of the debt and it's age?
• Do you intend to pay voluntarily?
• If not, why? If so, why haven't you paid yet? (The answers to these questions might take the conversation into any number of directions.)
• At what address would your company receive Service of Process, and to whom should it be addressed?
• Can we arrange to have someone pick up payment in full today?

These questions will all be asked in an aggressive yet professional manner, so you can probably already agree that it could be seen as hostile. But, there may be one or more of the following that we already know:

• The customer has lied to our client several times.
• They have received X number of monthly statements in addition to the packing slip and original invoice (sometimes even additional copies of the invoice).
• The person responsible for paying may have been avoiding or dodging the client's calls.
• The mail (statements) may have been returned as undeliverable.
• The phone number may have been changed or even worse - disconnected.

So, what happens? Naturally, the customer is put on the defensive. They weren't expecting our call, so they are shocked. Or, maybe they were and they were "ready for us". Either way, now they are taken aback and they have a couple of things they have to do. First they have to project the blame elsewhere. This is where the excuses start. The widgets weren't shipped on time, they didn't work, they were the wrong color, they arrived damaged, we were charged for 1000, but only received 100.......the list goes on, and on, and on.....!(You get the picture). The second thing they have to do is find a way to get back in your good graces, because you obviously thought they were scum so you sent them to the "bad guys". Now this may not have been what you were thinking, but that may be their perspective. Which brings me to the point of this post (sorry to take so long to get here).

Now they have to call you, make us look like monsters, and get back in your good graces so that they can hopefully stall the process and lie to you about payment for another six months. Do you see where I am going here? We have had every lie that you can imagine told about us, and I am sure every collection agency can say the same. They range from accusations of cursing and swearing, to insulting the customers dead mother and beyond!

There are a couple of things that I want to make you aware of here, and I can't speak for all collection agencies because there are always exceptions, but we hold true to these principles. We are in business, and intend to stay in business, so there are lines that we refuse to cross:

• We will never yell or cuss at a customer of yours.
• We will never insult them personally.
• We will never badger or harass.
• We will remain professional at all times.
• We will not make empty threats.

We do not have the time nor energy (nor do we intend to spend the money that it would take) to defend a lawsuit. There are licenses and accreditations to loose, not to mention the business as a whole. We will not cross the line. Our very livelihood depends on it!

Please remember your customer is on the defensive and running scared because you have decided that it is time to take action. To borrow a well-known line from a well-known movie, "It's not personal, it's business!". It's not personal, and we will never treat it as if it is.

If you don't currently work with a collection agency, your agency is too aggressive (or not aggressive enough), or you would like to just give us a try. Please feel free to contact me, Neil Murray, at (800)313-9611 Ext.103 or neil@hamiltonandmonroe.com.

Thanks!!