The Economy of Collections
Phillip Weaver

The Commercial Collection Agency Association (CCAA), which represents the most prestigious commercial collection agencies in the United States, reported record-breaking volume of business-to-business collection accounts placed with member agencies in 2001.

Emil Hartleb, the Executive Director of the CCAA, noted a 31 percent increse over 2000 in the dollar volume of accounts placed with collection agencies. All across the industry, fingers are pointing to the weak economy as the reason for this increase. Many businesses are experiencing cash flow problems and paying late or not at all, resulting in increased bankruptcies.

Credit professionals should be concerned with all delinquent and slow-pay customers, including those who break payment promises and write NSF checks. Accounts that show any danger signs should be reviewed for placement with a collection agency. If you wait for the company to declare bankruptcy, it could be too late.

To learn more about the CCAA and for a list of members, check out www.ccaacollect.com.

Reducing Credit Risk
Phillip Weaver

Almost every small business has problems with collections. Many collections agencies offer a database scan that can help you identify at-risk clients and make informed decisions about extending credit or pursuing collection activity.

A database scan is a search of a collection agency's database that determines whether the customer has been placed in collections within the last two years, and, if placed, if the debt is still oustanding. A database scan is a good tool to use in determining credit limits and sales terms for new customers. For slow-paying customers you can use the results to determine appropriate collection actions.

Many collection agencies offer this service at a discount or free to clients. The accuracy of the information depends largely on the source of the data and the size of the database. Creditors should therefore solicit the help of an agency with a national presence and a sufficiently large database to ensure thorough search results.

Time is Money
Phillip Weaver

Everyone has heard the phrase "time is money," and when it omes to business-to-business collections, nothing could be more true. The Commercial Collection Agency Association (CCAA), which represents the most prestigious commercial collection agencies, regularly publishes statistics concerning commercial collections. CCAA statistics indicate that collectibility of delinquent receivables drastically decreases over a 24-month period.

The CCAA's statistics reveal that the longer an account goes unpaid, the less money you are likely to collect. Commercial Collections Over Time illustrates the decrease in collections over a 24-month period. On the date an account is due, you are likely to collect 98.8% of th emoney owed to your company. After 24 months, you are likely to collect only about 11.2% of the money owed you.

The sooner you refer delinquent accounts to a qualified, reputable collection agency, the more money you are likely to recover.