A publication for Credit and Finance Professionals
The other side of outsourcing; A Different View
By: Robert Lenardson, President CCC-LA
This past year many companies continued to trim operating costs, forcing credit executives to reduce personnel count. This reduction in staff has for many, had the counter-effect of a reduced collection capability. One popular solution has been to seek outsourced call services, for the early dollars (0 to 60 day aged) and the small balance accounts. This reportedly works fairly well as long as disputes are not widespread (or overly detailed) in the account population. If however the account base is populated with a high percentage of disputes or uncollectible customers, hidden costs/expense can easily threaten the original expectation.
The outsourcing partner will have little choice but to set aside the increasingly difficult recovery, as the vastly reduced compensation package will not allow for any time consuming contact or the use of independent counsel. The resulting costs of carrying those doubtful receivable will more than eat up the savings gained from outsourcing. Why? Typically these accounts rotate right back into the inside collection staff which is now reduced in numbers, creating in some cases a drop in morale and reduced time spent with more productive collection work.
We recommend a more comprehensive (start to finish approach) to the outsourcing process. A comprehensive outsource plan; one that seeks the advantage of early dollar clearance and proficient address of the disputed and slow paying customer group/s. A two or three tier arrangement, affording the outsourcing partner to go the distance will maximize recoveries and directly affect the bottom line. The percentage rate on soft collections should be followed by a slightly higher rate for disputed accounts and an all inclusive rate that allows for the retention of local counsel. The life of the claim may extend beyond letter writing and one phone call which is the extent of most low fee outsourcing arrangements.
For more detailed discussion and direction on this very important topic, Mr. Lenardson can be reached by Clicking on the [Los Angeles] button at the top of this page, or selecting the city button representing the CCC office nearest you and speaking with the office manager, who will be happy to assist you in achieving the greatest outsource/insource result for your situation.
