My hope for you- as I sit to write a blog or post on our LinkedIn- is to pass along some pearl of wisdom that will help you in your daily life. After having authored countless articles I find myself struggling to come up with the topic I thought would be worthy of your time…until now.
This morning while I was doing some account holder file audits and general fall cleaning on the inventory sent to PCM for recovery, I noticed a significant trend.
The status code that I'm using with a high degree of frequency lately is DOA -- Dead on Arrival. AKA: the file must be close before it even enters recovery. Recovery from an unemployed person is still possible unless they make a formal assignment into bankruptcy. However, when a company runs out of cash, it is dead, and its creditors do not get a second chance.
All this brings me to the point of this article: PCM wants to help you to maximize your return on your time and your investment. If you know your commercial customer is no longer in business, and your credit application does not contain language that would make the business owner personally liable, don't bother gathering all of your back-up and hiring a collection firm – 99.999% of the time, it's too late.
A contingency collection provider can only be effective if your customer is still in business. We recognize it may be very frustrating that you have not been able to motivate your customer to pay, and you want to try your very best. However, each day you receivable ages, it statistically becomes more challenging to recover. Alysia did a great job talking about it at the annual Lloyd Sadd Risk Conference:
25% Of Something Is Better Than 100% Of Nothing.
The secret to enhanced recovery from yourself and agency partner is to know the "tipping point" of when your time and efforts will not likely result in the payment from your customer. The tipping point, for most creditors in the B2B Marketplace, is when your customer is 120 days past due (or 150 days from the invoice date). Clearly, there is something wrong, and your interim efforts haven't yet had the desired effect. The customer is still likely in business and in the early stages of perhaps some fatal trouble, so now is the time to take decisive action.
If an account holder told me that I was trying to get blood from a rock, I would tell him "You are not a stone Mr. Customer, and we are not the Red Cross." By the same token, if you send your slow-paying customers to your collection provider while there is still a pulse, the chances of recovery are infinitely higher than if you wait until they are out of the business.