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Credit and Collections Outsourcing

Has anyone had a positive experience outsourcing credit and/or collections? My gut feel says this is too linked to the customer experience to work, but I need more than gut feel to respond to this question from my board.

Answers

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

I talk a little about this in my training at https://www.proformative.com/courses/commercial-credit-training .

The key is to find an outsourcing partner that will handle your accounts the way you want them to. You will find that most agencies will tailor the approach to your requirements. In fact, you can design the system where your customers don't even know it is outsourced (assuming these are commercial accounts and not retail).

I would be happy to get you in touch with an outsourcing partners if you like. My email is Scottatalphamac [dot] com if you are interested. You need to contract with a professional, reputable and ethical firm. With close to 6k collection agencies in the US, that can be a real challenge.

In my view, if you find a professional and ethical firm, you will be very satisfied with how they treat your customers.

If these are retail accounts, there are very specific rules that an outside collection agency must follow, but you can still control the "tone" of the collections if you retain ownership of the accounts.

Jim Schwartz
Title: Corporate financial advisor
Company: Wabash Financial Strategies
(Corporate financial advisor, Wabash Financial Strategies) |

Consider credit outsourcing separately from collections (aka account servicing). Although I've never done it, outsourcing the credit decision process is likely to work when everything about the decision can be quantified and done against a previously/mutually agreed set of standards (i.e., credit scoring vs. using qualitative and judgmental factors).

Don't focus too hard on the collection agency model in discussions with your board. Frequently, an agency gets receivables that are already stressed with probably of collection uncertain. That's equivalent to starting with one hand tied behind the back.

Outsourcing collections need not be too intertwined with the customer experience too work. Making this approach effective requires clear, written guidelines and delegation of authority between the organizations, immediate hand off of new A/R to the collection partner, and an enforced "no meddling" policy for the originator. Genuine customer complaints and claims can be escalated to a designated party for prompt review and resolution. In the 1990s I supervised a servicing arm that was acquired with a portfolio of long-term leases and loans. It was transformed into a third party servicing organization and now services several billion dollars of receivables for some of the largest organizations in the US.

Deanna Miller
Title: Chief Financial Officer
Company: Professional Plumbing Group
(Chief Financial Officer, Professional Plumbing Group) |

Thanks Jim.

Pamela Wise
Title: Director/General Accounting
Company: The E.W. Scripps Company
(Director/General Accounting, The E.W. Scripps Company) |

We outsourced credit and collections to on offshore company with the calls coming from Manila. Due to turnover and voice issues, we are now pulling it back. We will be looking at potentially using a onshore outsourcer, but feel it may be best to just use inhouse people to do the collections. We are seeing loss of customers and less collections with the work being offshore.

ArLyne Diamond
Title: Owner - President
Company: Diamond Associates
LinkedIn Profile
(Owner - President, Diamond Associates) |

Early in my career I was a credit and collections assistant manager - and I learned that being helpful and friendly and respectful to the people I was calling (we used the telephone in the olden days) I was far more likely to work out a payment plan - that actually led to their paying their bills.

So, I have some hesitation about outsourcing - since most of where we outsource to uses formulas rather than interactive conversations. I think collections in particular are part art and part science - and the typical aggressive bully tactics don't work as well as professional intelligence and helpfulness.

By the way, out of the credit & collection experience, learning over and over again that the customer (I worked in an International Hospital-Medical Supplies Organization) had not received an item, returned an item for which they didn't get credit, or had some other problem - so I created the concept of a customer service department (before computers) and sold it to upper management - I became its manager and all customer problems were handled in an efficient and satisfactory manner, pleasing both my boss (The Credit Manager) and our customers.

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