Many large companies, over the past several years have had to revamp their internal policies due to key legislation enacted in July of 2002: the Sarbanes Oxley Act (SOX). This legislation has become especially important for credit departments.

Being in sales and marketing, I have many conversations with credit managers on a daily basis. The effects of this legislation have become increasingly apparent and especially in how companies and their collection firms communicate with one another.

In short, the Sarbanes Oxley Act was a direct result of the large accounting scandals that occurred in 2001 and 2002 which shook the very core of public accounting methods (Lucent, MCI Worldcom, Enron, etc.). The Act helps deter these scandals from occurring and create a higher standard of accountability.

Although SOX is still in its formative stages, the section of the Act that should be of concern to credit management is mainly in section 404, internal controls. This key section also adds the responsibility of having SOX compliant credit policies and procedures for the credit function. You can download the Sarbanes Oxley Act at www.findlaw.com .

The Agencies role in Sarbanes Oxley

As always, choose an agency with a long-standing track record of service in publicly traded or large companies who understand SOX. Don't be afraid to ask specific questions. For example, can you print out status reports and collection notes on each account that is placed whenever you need them? When an account is closed does the agency keep detailed notes in their system and inform you as to why, so you can cleanly write it off?

Does the agency run settlement offers and concessions, if any, by you first before granting them to a debtor? Do they keep accurate accounting records?

Bottom line: In addition to meeting acceptable recovery rates and other business process requirements; your agency should be able to support your Sarbanes Oxley initiatives with easily accessible and accurate reporting.