Collector - October 2016 - 36

BUSINESSOPERATIONS A Running Start More commercial collection agencies are collecting younger debts as clients' ancillary AR departments, making first-party outsourcing services more accessible to the B2B market. By Bill Mann, IFCCE O nce focused almost exclusively on eleventh-hour contingency collections, a growing number of commercial collection agencies are collecting debts as young as 30 days past due, making the benefits of first-party outsourcing more accessible to B2B clients. This trend is fueled by business forces acting on both creditor companies and agencies. For most B2B companies, the first-party collections programs offered by business process outsourcing services aren't usually an option, as BPOs often require a minimum number of accounts larger than the relatively small client base of most B2B businesses. But the B2Bs are dealing with the same pressures to do more with less, a trend that has led consumer-based businesses to outsource accounts receivable functions. Outsourcing some or all of these a-little-late accounts to a commercial collection agency improves cash flow and frees the business to acquire more customers-even when owners or stockholders are not ready or willing to authorize more credit department hires. Because the debts are younger and easier to collect, first-party collections cost less. The growing acceptance of telecommuting is also contributing to the trend, added Greg Cohen, president of the International Association of Commercial Collectors and president-CEO of Caine & Weiner. "When you're already moving away from the corporate culture of having people sitting next to each other, you become more comfortable with using an outsource partner," he said. From the commercial collection agencies' perspective, offering first-party 36 services grows business by bringing in new clients and providing additional services to existing clients. "It diversifies revenue and, because clients are usually charged an up-front flat fee, helps predict cash flow," said Joe Batie, chief commercial officer at Caine & Weiner. Ken Wojtach, vice president/operations of HS Financial Group, which is launching a new program, said his clients have asked for this. He discovered that many creditors' late accounts were in a collections limbo, with debts not large enough to get much attention from limited in-house staff, not numerous enough to be sent to a BPO and not old enough to make the business willing to send them into third-party collections. HOW TYPICAL COMMERCIAL COLLECTORS' FIRST-PARTY OFFERINGS WORK While no two commercial collection agencies' first-party or similar-to-first-party programs are identical, IACC finds they tend to have traits in common: * A separate cadre of employees makes the first-party calls using gentler, customer-service approaches and language. * Usually, the agents contacting the latepaying customers identify themselves as representatives of the creditor company. This is not universally true, however, and is a matter of agency and client philosophy: Some want softer-thanthird-party techniques, but with a little added punch that comes with the words "collection agency." * Some agencies are willing to charge on a percentage basis after debt collection. * Multi-year contracts are not required; this is another way agency offerings differ from many BPOS. PROBLEMS, SOLUTIONS, ADVICE FROM ACCOUNTS RECEIVABLE In 2014, Ryan Ross, director of Global Treasury for education technology company Blackboard, had a team of nine accounts receivable professionals serving 6,000 customers. If a $25,000 bill was late, someone from the team would certainly call. "But there was no way we could get to the $400 or $500 invoices from a pure bandwidth perspective," he said. "My team might get to follow up only once every couple of months." As a result, smaller accounts would age past 90 or 180 days with a single call or email. Complicating matters, every school has different back-office procedures, and it wasn't unusual for a bill to go unpaid because it didn't reach the appropriate department or it had erroneous billing information. Reaching all of these customers with Blackboard personnel was impossible, but Ross was reluctant to send the accounts to third-party collections. ACAINTERNATIONAL.ORG http://www.ACAINTERNATIONAL.ORG

Table of Contents for the Digital Edition of Collector - October 2016