Receivables Control's solutions go beyond traditional agency services.  The General Auditing Bureau provides pre-collection services designed to hold collection costs in check while the Professional Services Group provides an array of services including outsourcing, portfolio liquidations, portfolio purchases, and education. 

Thank You For 43 Fabulous Years!

 Mike Zwach

Minneapolis early 70's

I would like to thank all of our clients and business partners for helping us eclipse 43 years in business!  We began our journey in 1970 with 3 employees.  Back in the 70's our focus was collecting regional consumer and commercial debts.  During the 80's we qualified to become a Certified Commercial Collection Agency and expanded our reach nationally.  

Minneapolis Today

We nurtured strong relationships with Fortune 500 companies.  In the years since we have expanded our reach into the commercial lending industry and we collect commercial debts worldwide.  We appreciate the opportunity to provide world class recovery services and we look forward to many more successful years! 

With baseball season approaching, Jim Fritz, our Vice President of Sales, questions if agencies would benefit from Spring Training.  Our clients are inundated with "pitches" from collection agencies.   Those clients tell me that all those pitches "sound alike".   I'll admit it, our industry does sound like clones and to the untrained ear, all companies do sound the same!  However, having met hundreds of our competitors over the years, nothing could be further from the truth.   To use a baseball analogy, there are competitors with solid line ups that make the play-offs every year, there are those that earnestly try to get better, and there are cellar dwellers.  I hope Jim's insights help you see the differences more clearly.

Also in this issue, Kelly Cronan, our Vice President of Collections, looks at what can happen to a company when you don't properly vett a collection agency.    Most clients don't realize how much risk they may be taking when they use an agency.  Be sure to read about how you can identify an unscrupulous collection agency.  This is one area where you don't want to be dealing with a cellar dweller!  

I hope you find this newsletter informative and I invite you to share it with your peers.  Thank you for your on-going support and partnership! 

Mike Zwach is the Executive Vice President and General Manager of Receivables Control. You can contact Mike at 763 315 9697 or email him at mzwach@rccmn.com.

Spring Training...That's the Answer! 

Jim Fritz  

Having made my home in Minnesota, I follow the Minnesota Twins.  Coming into Spring Training this year, the Twins are in desperate need of good pitching.  It occurred to me that my industry could also use some training around its "pitching".  Did you realize the "pitching" that agencies do has a direct impact on your productivity as a credit professional?  

Do you track how many collection agencies call you in a year?  I had one client tell me they had logged 152 calls in just one year!  Agencies are persisent and the market is saturated with companies that all "sound the same".  They all want your business, but how do you sort through the noise and figure out which agency to choose?  

Trying to figure out who is worthy of collecting your company's debt can be a daunting task, but it doesn't have to be that way.  

Here are some of my favorite industry "pitches" and a little bit about what each really means:  

We send private investigators to visit every debtor!

Ever hear this one?  This is a powerful concept.  No doubt, sending a human being to collect money has its benefits.  But do you really think someone is going to visit a debtor any place in the country, for any size of balance?  One of my clients received a pitch like this and threw it right back to the agency by saying, "I have 500 accounts all less than $200, are you going to visit all of them?"  The salesman went away with his tail between his legs.  This pitch is meant to play to your emotions.  Know that every reputable agency in the country can get a private investigator to someone's doorstep.  Sending someone to visit a debtor is part of a strategy that you use when the time and conditions are right.  It's really a tool for a collection professional and shouldn't be the primary selling point of an agency. 

We don't fool around, we sue everybody!

If a sales person is telling you their agency sues everybody, its probably a sign their internal efforts are weak!  One of the biggest misconceptions about suit is that it causes people to pay quickly because the debtors are afraid of litigation.  Most debtors have been around the block and realize that a lawsuit actually gives them more time to delay payment.  If you want your money faster, you want a professional collection effort at the time of placement and you want a collector who has incentive to collect your money today, outside of court!  Suits require that you spend money out of pocket and you pay a higher contingency rate, so use an agency that collects as much money pre-suit as possible.

We are the "biggest" and we have the most experience in your company's industry!

In the collection industry, the biggest players tend to have massive operations that feed into a bureaucracy.  Accounts may be "serviced" from multiple call centers across the country and they might be called from overseas.   Work is completed to a "minimum standard".  That means providing the minimum effort required on each account as opposed to doing everything possible on each account to get your money collected!  Being the biggest sometimes means being the slowest and least efficient.  Collections is a people business; collectors make connections with people.  No amount of technology can replace the benefit of one on one personal contact with debtors.  You don't need "big", you want a collection partner who is nimble and does whatever it takes to get each account collected.  

We collect 75% of placements!

Beware of any sales person who pitches that they collect X% of your placements.  The number they like to quote is normally north of 50%.  This sounds great, but what does it mean?  We have clients across many industries.  Some clients work their paper thoroughly prior to collections and some don't work it at all.  Some sell products that are highly valued to a group of credit worthy customers and others deal with subprime credit risks.  Some of our clients' recoveries even vary by regions of the country.  What I know is that if agencies recovered more than 50% of all their clients' paper, agencies wouldn't exist because clients would collect all that money in house!  An agency that claims they can collect a high percentage of your paper without knowing anything about your paper is playing to your emotions.  They are more likely to be slinging manure than selling effective collection services!

Sales is about appealing to people's emotions and creating urgency to take action.  A sales pitch may get you on the edge of your seat; however, instead of making hasty decisions, you need to slow down and examine what it is you really want.  Agencies with great products don't need to play on people's emotions.  Here's what a good product feels like to me:

Rewards:  Collectors work best with incentives.  Our staff is compensated based on every dollar they collect for you.  This ties their compensation to generating successful results for you!

I hope my stories have given you a smile and some insights on the collection industry. Some people will say anything just to try and get a client to switch partners.  I would love to hear any entertaining stories you have about "pitches", drop me a note at jfritz@rccmn.com.  I enjoy hearing the latest about what my sales brethren are up to!  Remember the commercial collection industry is the same as any other industry, you get what you pay for!  Go Twins! 

Jim Fritz is the Vice President of Sales for Receivables Control.  Jim can be reached at 763 315 9631 and his email is jfritz@rccmn.com.

The collection industry has gone through some challenging years.  Just prior to the recent crash, it was a good time for agencies.  Overall economic activity was booming.  Recovery rates soared when it was simple for debtors to take cash from their homes and pay off creditors.  After the crash, placements skyrocketed and recoveries declined.  An industry that previously looked like it was immune to the ups and downs that others  experienced took a giant step backwards.  It caused many within the collection industry to restructure their business models.  As the economy stabilizes, many agencies have rebounded and some have closed their doors.  Sadly, there are some agencies that hang on by another means and that reminds me of Charles Ponzi.  

You may know that Charles Ponzi is the namesake of a notorious con that bilked investors out of millions.  But what does Ponzi have to do with the collection industry?   Collection agency clients don't "invest" in an agency.  They don't buy stock in agencies expecting returns like an investor would expect.

Ponzi Mugshot

Think of it this way, the investment part of the Ponzi scheme relies on a client's placements.  The client places accounts for collections and when the accounts are collected it is the cash generated from those placements that fuels the Ponzi scheme.  

Here's an illustration of the scheme:  A client places an account for collection for $50,000 at a 25% contingency rate.  The agency collects the account and doesn't remit the net amount to the client, i.e. $37,500.  The agency is supposed to keep the commission, but in this case they keep the client's money too!   Once an agency has spent their clients' funds, the Ponzi scheme begins.  The agency resorts to attempting to pay clients from future recoveries they generate from other clients' placements.  It's a vicious cycle and in a bad economy when placements and recoveries decrease, that's when the scheme can fall apart.  It's that simple.  Agencies are to fund their business with earned commissions, not client funds. 

What are warning signs that might indicate something is out of line with your collection agency partner?

• The agency doesn't provide reporting on closed accounts.  Schemers don't make it easy for you to see which accounts are closed.  If they shared information on closed accounts, it might lead you to ask questions about payments you might see on accounts for which you haven't received funds.  Their logic: out of sight/out of mind.

• The agency doesn't have a routine remittance process.  Instead of getting remittances timely (monthly), you receive them sporadically.  This may be a sign that behind the scene the schemers are busy cooking the books.

• The agency makes excuses about remitting funds late.  "Our system was down", "we had a major expense", "we'll cover it next month", these can all be signs the agency is holding on to and misusing the clients' money. Client funds are just that; the CLIENTS' funds.  They must be remitted routinely, this isn't an area to tolerate excuses.

• Even though you weren't paid by the agency, debtors (your former customers) call you and claim to have settled with or paid the agency.  Investigate any accusation a former customer makes that the agency has been paid already.

How can you reduce your company's risk?  Check out your agency partner prior to doing business with them.  It's suprising how few clients go out of their way to make a personal visit to their collection agency.  If you have never visited your agency, schedule a visit so you can see the operation first hand.

• Verify the agency has a client trust account and an operating account.  An agency's operations are not to be financed through use of client's funds.

• Note the professionalism of the staff and the appearance of the office space.  They should meet your professional standards.

• What are the backgrounds and level of expertise of the staff?  Rampant turnover is a red flag for mismanagement.

• Check for complaints with the Better Business Bureau, the Attorney General, and on-line message boards.  Most of the data you need is available through a simple search of Google.  If there is a long record of unprofessional behavior, then you should choose a different agency.

• Check client references from reputable, recognizable clients.  Call and discuss the agency's performance and how the agency handles remittances. 

• Ask for a bank or accounting reference from the agency.  A sound company will gladly comply with such a request.

• Make sure your agency is a Certified Commercial Collection Agency (CCAA).  This is a designation that is granted by the Commercial Law League of America.  It sets high standards of compliance for its members, including:

• In business at least 4 years to be considered for membership.
• Performs a minimum of 80% commercial collections.
• Maintains a separate Trust Account into which all monies belonging to creditors (clients) are placed.  Twice annual audits.
• Post a surety bond in the minimum amount of $300,000 for the protection of its creditors (clients).
• Compliance with all local and state regulations governing its operation of a commercial collection agency. 

Now that we have covered warning signs and reducing risk, here is a list of reporting requirements and systems that give you every chance of discovering if your agency is mishandling your funds. 

• Funds are remitted monthly in a clear format.  The remittance statement is detailed and ties out to actual account placements.  Cleared funds are always remitted on a routine, scheduled basis. 

• You receive "closed" account reports at the time each account is closed.  You should see your account placement inventory turning over, i.e. you should see payments and settlements being remitted to you and you should see uncollected accounts returned to you by way of closed account reports.

• You must receive reporting on the collectibility of your accounts.  Even though recovery rates can vary widely by industry and even by company within an industry, you must get a monthly update that allows you to see your recovery rates.  Any erosion in recovery rates should prompt a conversation with your agency. 

• Set up a semi-annual review with your agency centered around the subjects of account placement activity, payments and settlement results, recovery rates, and closed account reporting. 

Just how many collection agencies run Ponzi schemes?  We suspect it is a small number; however, if you happen to be using the wrong company, the results can be devastating.  An unscrupulous agency can quickly steal tens of thousands of dollars from a client without the client having any clue that the theft has occured.

Know the character of the collection partner you choose and ensure you hold them accountable for results and reporting.  That is the best way to mitigate your risk.

Kelly Cronan is the Vice President of Collection Operations.  Kelly can be reached at 763 315 9660 and his email is kcronan@rccmn.com.

Receivables Control

Executive Team

Luke Vidor, Pres/ CEO

Quick Links

Isaac Hjermstad was named Receivables Control's 2012 Employee of the Year. 

This honor was bestowed upon Isaac by his peers for his dedication to production excellence.  Isaac has consistently been a top performer at Receivables Control. 

Isaac joined Receivables Control in 2001 and is a Collection Manager and Senior Collection Professional.

Congratulations Isaac!

Gina Schillewaert was announced as the winner of the 2012 Ignitor of the Year Award. 

Gina joined Receivables Control in 1998 and provides a tremendous level of support to our clients, as well as our sales and collection teams. 

Congratulations Gina! 

Trouble Overseas?

Our clients are often frustrated most by problems they have collecting foreign receivables.  

Let us help you collect your problem foreign accounts.  Whether its Austria or Zambia, Saudi Arabia or Shanghai, Mexico City or Moscow,  Pakistan or Peru, we have you covered in these locales and all points in between!

Our global recoveries team collects millions of dollars for our clients.  Contact us to help you today! 

Receivables Control

7373 Kirkwood Ct,

Suite 200,

Maple Grove, MN 55369

763 315 9600

www.RCCmn.com