The Truth About Collections
Ben Franklin first said it in 1735 almost 300 years ago – and it’s as true today as it was then.
“An Ounce of Prevention is Worth a Pound of Cure”
I mention this because one truth you need to know about collections is that an average collection agency has a recovery rate somewhere between 11% and 20%. A good agency closer to 30%. That’s some pretty simple math, on average close to 70% of accounts turned over for collections are never recovered. Post judgment collections are no better, 75% to 80% of all court judgments go uncollected.
That brings me to the drum I’m always beating ….
Collection Prevention is better than the best agency!
Consumers – we recently got a call from an unfortunate consumer selling an appliance online for $400 – one of his prospective purchasers offered to buy with a check – but he needed some cash and asked our unhappy seller if he could give him a check for $1000 and get $600 cash back …. (I don’t have to finish this story right?)
I know what you’re thinking, “I’d never fall for that” – but you might – when face to face with a charming thief we often feel compelled to trust – we hate to say NO and we want to believe their too good to be true offer. Check yourself – carry around an index card for a day, every time you say yes when you think or feel you should say no, make a check mark – I’m willing to bet you’ll be surprised by your results!
Business to Business – there’s plenty to say about preventing collections in a B2B scenario. I’ve said a lot of it in my Collection Prevention Series which you can read here. But the bottom line “Truth” is, if you’re experiencing more than an occasional collection problem in your business it’s very likely you have a process problem not a customer problem.
Want to fix it? So you can;
- Trust your AR department is running on all 5 cylinders so you can move on to other business
- Know your AR aging is accurate so you’re sure how much your customers actually owe you
- Reduce DSO and collect your past due balances faster
- Identify and collect your bad debt
- Quickly and easily write a collection policy (I know you don’t really want to do this, but it will help!)
- Understand who should be collecting your receivables and who should not
- Know what you can and cannot say when collecting
- Organize and staff your AR department the right way
- Know once and for all how long it really takes to handle AR
Pick up a copy of “How to Clean Up Your Receivables and Get Paid Faster Now” at 2009 prices $79 until May 31st, 2019 – free updates forever. I’m working on the 3rd edition now and hope to finish by early June. Purchase before the deadline May 31st and I’ll throw in our 23 In-House Collection Letter Templates – they’re provided in both an editable word format for ease of use and a PDF format for easy reference – deadline is firm – after the 31st $158 no discounts and no bonus.