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Originally printed in
Credit & Collection Manager's Letter
Your customer list is probably your most valuable asset -- and now you're going to entrust it to outsiders? That question should be foremost in your mind in selecting a collection agency. What you should be looking for is proven integrity, continuous effectiveness, and a determination to establish and maintain trust.
When Jim Nugent became director of credit and collections at Genesys Conferencing (Bedford, Mass) five years ago, receivables was a mess. Collections were haphazardly spread over five different locations with little to no coordination. There were large quantities of open accounts. Days Sales Outstanding (DSO) was nearly quadruple the company's net 30-day terms.
Management approved Nugent's recommendation that substantial parts of the collection operation be outsourced, with one stipulation: He should solicit bids and test the results of at least three agencies.
He readily agreed, all the time knowing which agency would wind up with the Genesys account. "I've been in credit and collections for a long time and I've often found that agencies try to win business by guaranteeing results," he says. "They say they'll collect 70% or 80%. But nobody can predict results like that without knowing plenty about your business and your accounts. It is impossible."
No Guarantees
At two companies I had previously worked for, we worked with one agency. That agency made no guarantees, but was committed to working closely with us and doing the best they could to collect the files we sent to them. That agency was ABC-Amega in Buffalo, N.Y., and in three months, they had all of Genesys' business."
ABC-Amega's commitment to working closely with Genesys translated into becoming an extension of Nugent's collections group. Genesys collection staffers met regularly with ABC-Amega collectors, who had access to the Genesys data systems and the opportunity to familiarize themselves completely with Genesys' customers.
"Our customers can leave us," Nugent points out. "We have to be very careful. It's absolutely essential that our collectors know what to say and how to say it. The agency's collectors were so effective, we had them represent themselves as Genesys staffers. Only later, when we get into hard-core, third-party collections did they become agency collectors to our customers."
How does ABC-Amega recruit and train collectors who can work this effectively with clients' customers? For the first-party (outsourcing) side of the business, candidates with extensive customer service experience, along with some receivables background, are recruited. For the third-party side, the company looks for people with skills and extensive experience in collections. But, adds ABC-Amega President Paul Catalano, "We always take as much time as necessary to school them in how we believe accounts should be handled on behalf of our clients."
Qualified candidates undergo an initial interview with the staff recruiter, followed by one or more interviews with management and executive staff," he continues. "Before hiring, background and reference checks are performed on candidates who successfully pass through the interview process.
"At entry-level, our collection staff is required to have a minimum of three years experience in a professional office environment, previous collection and customer service experience, and a four-year degree or the equivalent combination of the above."
Jim Nugent says that ABC-Amega collectors' efforts were a key factor in Genesys' DSO dropping from 110 days to 52. And while sales have grown each year, the number of accounts referred for collection has fallen continuously. "To a certain extent," he says, 'they're working themselves out of a job."
On to Europe
The job is expanding in Europe, where Genesys' audio, video and Web-based conferencing products are now in wide use. Managing receivables in markets thousands of miles away with different languages and cultures is obviously a major challenge.
Genesys had tried European collection agencies without much success. By 2004, DSO for European accounts was up over 100 days and the decision was made to bring in ABC-Amega.
"At the beginning, some Europeans were pretty skeptical about having a New York company calling customers in Sweden and France," notes Nugent. "But for us, it was a natural extension of what we'd been doing in North America, keeping the same processes and procedures. The ABC-Amega European staff has the language skills to operate in the 10 countries where we do business. They also have the cultural familiarity we need. For example, we'd been invoicing our Belgian customers just once a month, on the last day, because we'd been told that's what was expected. Loading up all the invoicing at the end of each month was a problem, both for processing and for cash flow. ABC-Amega knew better. They told us it would be no problem billing twice a month, and they were right. Now we've spread out the workload."
Attorneys
Genesys also found that for seriously overdue accounts, ABC-Amega has local attorneys available. "When you get into a real problem with an account in Berlin, what do you do, as the sales rep?" says Nugent. "We found they have attorney contacts available all over Europe."
All affiliate attorneys specialize in commercial law and collection-related services, and all are required to conform to strict reporting standards. "They're continually monitored and appraised to ensure our clients receive the best representation possible," says Catalano. "They're required to conform to strict standards of reporting, which are continuously quantified and evaluated."
This pattern of meticulous selection and tight monitoring of both collectors and attorneys has given client companies like Genesys Conferencing the confidence they need to have ABC-Amega contacting their customers.
"In Europe, as in this country, the key to a really successful relationship with an agency is the trust factor," Nugent sums up. "That's something that develops over time with your staff and their staff working closely together."
*****
©2006, CCH INCORPORATED, All Rights Reserved. Reprinted with permission from (CREDIT AND COLLECTION MANAGER'S LETTER)
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