Note: This article was first published in the
November/December 2002 issue of Recovery Advisor Magazine (page 12, Volume 2,
No.3) and is reprinted here with the permission of the author. Additional information about this
publication, now known as Collection Advisor Magazine, can be found at www.collectionadvisor.com.
Time is Money
By David Schmidt
This may sound simplistic, but the surest way to improve collections is
to spend more time collecting. Let me
explain. In terms of credit and
collections, the typical B2B vendor has computerized little else beyond accounts receivable, typically providing collectors with a variety of look-up
tools, but little in the way of workflow utilities. When you study how collectors working under these circumstances spend their time, only about 25 percent of their day is actually spent contacting
delinquent accounts – and too often, less than that.
The bulk of their time is
spent gathering information to approve orders, answer inquiries, resolve discrepancies,
prepare reports and perform other tasks.
In fact, most will spend more time deciding whom to call next and
reviewing the account status preparatory to making a collection call, than they
will spend actually making calls.
In this type of situation,
anything done to increase the amount of time a collector spends contacting
past-due customers will likely improve collection performance. This is why collection software with its
workflow and communication tools is so powerful. While this software allows you to contact more accounts in a set
period of time, most productivity gains result from spending less time gathering
information and performing clerical activities. The time devoted to contacting customers can be at least doubled
and hopefully tripled, resulting in a dramatic improvement in collection
performance.
Even if you don't hive the
opportunity to install and use a collection software package, you can
significantly improve collection performance by finding ways to diminish the
time spent on support activities.
Remove yourself from the prioritization, preparation, follow-up and
analysis stages of the collection process - and then rededicate to the contact
phase. It will boost productivity.
Consolidate Information
A large part of the problem
arises because all the information needed to make a call or send a note is
seldom in one place. When notes are written on an aged A/R trial balance, transaction
details on the computer and contact information elsewhere, it takes a
considerable amount of time to gather all the background data needed to place a
collection call. Time is also wasted
transferring notes to a new aging report or manually checking off payments.
If your A/R software doesn't
have useable notepad or calendar utility, off-the-shelf contact management
software like Microsoft Outlook, GoldMine or ACT!, can be an effective
alternative. Consolidating all
necessary contact and balance information on one computer screen with hot keys
to any additional details a collector might occasionally need to review helps
as well. Online access to document
images also saves lots of time otherwise spent finding and copying paper
files. The fewer keystrokes needed to
get to the data, the better.
Add Communication Tools
Providing your collectors
with communication tools also will free up significant amounts of time. Being able to fax and email invoices, and
other documents from the collector' s PC desktop significantly boosts
collection efficiency. These
capabilities are easily added to any PC and will help collectors maintain
adequate coverage of their smaller accounts so that there is still plenty of
time left to call all the larger past dues. With Windows-based software,
anybody can cut and paste account information into pre-designed templates for
easy dunning. Advanced users should be
able to create merge files to boost productivity even further.
Create Organizational Efficiencies
While there are many system
improvements that can free up more time for collections, don't overlook
something as obvious as departmental organization. A small department with four collectors supported by a clerk can
be more productive than five collectors that have to do everything for
themselves. Larger credit departments
should look at using specialists or otherwise reorganizing how work is assigned
before adding staff, including large account collection reps, deduction
specialists, soft collection reps, closers and others. Workers who can concentrate on one type of
activity for a block of time become more
productive. Providing collectors with
blocks of time free from interruptions will further increase both the quantity
and quality of their collection efforts.
Whatever you do, remember
that roughly 80 percent of your sales come from only 20 percent of your
customers. Your ability to focus sufficient resources on these critical accounts,
while quickly and efficiently handling all the rest of your
customers, is the key to superior credit department performance. It just takes
making good use of your time.
David Schmidt is founder and principal of A2 Resotirces in Yardley, Penn., and is co-author of "Power Collecting.” Contact him at dave.schmidt@a2resources.com.
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