A Thoughtful Approach to Third-Party Selection
Would you purchase and install an expensive piece of machinery and expect employees to operate it without training and instruction? Of course not. Yet, we see companies entrusting their second most valuable asset (accounts receivable) to others without sufficient regard as to how to best utilize the expertise available from a properly selected third party. Today, cash management and cash acceleration services can be as professional and productive as you wish to employ. Because no seller can collect all accounts receivable on time, you should determine that credit control and recovery are as much an overhead item as are utilities. Credit should be viewed as a sales tool, and you should expect losses. However, these losses can be controlled and should be handled by a professional who is capable of representing your interests in a fair and timely manner at an acceptable cost. Some companies pick a third party purely on low unit cost. Chances are such companies use merely automated contacts and you risk impersonal collections that will alienate your customers. What you need to seek is balance--a third-party collector that can complete the job at an acceptable cost without alienating customers. Such an arrangement allows you to sense the right point beyond which your own efforts will be costly and nonproductive. When selecting a third-party collection service, look for a company that can do the following:
- Provide immediate personal service on the account.
- Provide continuous service for a predetermined period of time.
- Deliver recovery demands in a nonalienating, but attention-getting manner.
- Consider and address your specific, unique needs.
Another important point: select a third party that will assist you in the pre-turnover process. That is, select a company that will reduce your need to engage in collection activities and seek outside collection help. Properly structured, this relationship will allow you to be more productive and reduce costs through creative pre-turnover steps. You will save money as you recover money faster. Thanks to James T. Herst, President, Performance Source, Inc., Highland Park, Illinois. James T. Herst is president of Performance Source, Inc., a consulting firm and collection agency that specializes in credit and collection management and personal contacts by attorneys to recover slow-pay and delinquent accounts without customer alienation. Educated at the University of Southern California, Herst also serves as a consultant on cash-flow strategies. He writes, speaks, and holds regular group workshops on credit techniques.
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