The Communicator

for the proactive credit professional

Fall 2011 

 

Receivables Control provides B2B receivables solutions.  Our services go beyond traditional collections.  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. 

Is Economic Upheaval The "New" Normal?

 

Since the subprime crisis of 2008 people in the business community have been looking forward to the economy getting back to normal.  Companies have down-sized, their books are cleaner and their operations are leaner. It was assumed that the economy would pick up steam and we would be on to the next boom cycle. However, as 2011 comes to a close there is no recovery in sight.

 Greece

Unemployment is stuck above 9%, inflation fears abound, and the pendulum has swung in the banking community.  Many argue that lenders have gone from taking too much risk to taking none at all. This is all against the backdrop of an uncertain economic policy from Washington. There is disagreement about the best way forward and it appears at this point, the two sides are looking ahead to the presidential elections of 2012. When is it all going to end?

 

The short answer is the business climate isn't likely to improve any time soon.  So you can expect a turbulent stock market, tentative lenders, and more business closings. Companies must remain diligent and mitigate their risk through these troubled times.

 

What's a credit professional to do to maximize their cash recoveries during these troubled times?

 

Focus your efforts on areas where your influence will positively affect your company's bottom line.

  • Every communication you have with the customer should always increase your customer's sense of urgency to pay your company.
  • Review your credit policies and credit limits to ensure high risk customers are not falling through the cracks.  Identify and prioritize high risk customers.  Have an action plan for each:
    • Check credit limits to ensure they will not leave your company over-exposed.
    • Make sure your company isn't too heavily invested in any one specific customer.
    • Have staff  make pro-active collection calls at the very first signs of delinquency.

What you have done in the past may not work in this economy.  The luxury of extended terms is no longer possible in this environment.  You want to be a creditor that is moving to the top of the payment list; not jockeying for position after other creditors get paid.  We want you to recover your money while other creditors are still sitting on the sidelines. 

 

 

From the front line:
High impact recoveries, low cost.

 Front Lines

Recently, a national home and garden distributor was looking for a solution to collect a receivables portfolio of $2 million.  Since the company experiences seasonality in its sales, they didn't have the resources to contact and collect the accounts internally.

 

To achieve complete coverage of the accounts quickly, they turned to the General Auditing Bureau's pre-collection program.  They successfully recovered 95% of their accounts for a cost of only $900.  That is less than one tenth of one percent!

 

To learn more about how the General Auditing Bureau's fixed cost pre-collection programs can save your firm money, just drop us an email.

 

 

Déjà vu?  Who will Survive?

 Life ring

How is the economy impacting lenders and more importantly how do lender's take action to minimize their losses when faced with a liquidation scearnio? To find these answers let's look at trends we've noticed through our Professional Services Group at Receivables Control. The Professional Services Group (PSG) assists lenders, trustees and turn around professionals when liquidating accounts receivable assets in wind-down cases.

 

By the end of 2008, the construction industry dried up and during 2008 and 2009 the Professional Services Group liquidated record numbers of companies that serve the construction industry. Among the businesses liquidated were numerous lumber yards, flooring suppliers, tile suppliers, and electrical contractors. Notice the "s" at the end of each of those categories. Yes, we liquidated numerous companies in each of those categories.

 

After a lull during the second half of 2010; we have noticed another surge of liquidating companies in 2011. The common thread in the liquidations we see deal with the survivor syndrome. While 2008 and 2009 weeded out the weakest companies in the industry, during 2011 we are seeing the next tier of companies liquidate, the survivors.

 

The survivors had taken action to reduce their debt loads, cut expenses, and reduce staff.  Many of the survivors took on customers of competitors who had fallen.  We are finding that many of the survivors haven't found enough revenue to stay afloat.  We are well into the second wave of business closings as a result of the 2008 recession. 

 

This has forced lenders to call the survivors' notes and we are seeing many more lumber companies, flooring suppliers, electrical companies, concrete companies and furniture companies liquidate. Did you notice the "s" at the end of each of those categories again? Yes, the categories are growing and we are seeing many more companies within those categories collapse.

 

It is timely to revisit what actions lenders can take to maximize the value of accounts receivable as they are faced with another surge of liquidations.  

  1. Routinely review your options and develop a liquidation strategy for each of your troubled loans.  If/when a company liquidates, you'll have a better chance of realizing the most value from the assets.
  2. What is the liquidation value of the accounts receivable?  Are you relying on the representations of the survivors' staff or have you had an assessment from an outside professional?
  3. Is it best to liquidate the accounts receivable with company insiders who may have other interests once the company goes into liquidation (finding their next job) or will outside professionals return more money to the bank/estate?
  4. Do you the lender/trustee have the expertise on staff to manage a liquidation of accounts receivable, i.e. colleciton calls, negotiations,  document management, reporting, litigation etc?  Will your internal efforts be as effective as outside professionals'?
  5. When the company shuts down, what will the customers hear/think when they find out their supplier is out of business? How can you minimize the negative impact of customers feeling they have been left high and dry without a supplier? 

When it comes time to implement a plan, implement the plan decisively. Once liquidating, hours can make a difference.   Lenders who hesitate or haven't implemented a well thought out plan can lose as much as 40% of the value of the accounts receivable. 

 

 

 

 

   

 

 

 

In This Issue
Economic Upheaval
From the Front Line
Deja Vu

Quick Links

Receivables Control

 

Executive Team

Luke Vidor, Pres/ CEO

  




Christmas
'Tis the Seaon for the Grinch!? 

As the holiday season approaches, we can't help but to think of the Grinch

 

 Don't take this the wrong way; we wish everyone a successful selling season.  However, be on the look out for those last time orders. 

 

This time of year thousands of cash strapped business owners decide if they will continue to stay in business past December.  A "last time order" is when someone places a large order and is likely to liquidate using your product to fund their going out of business sale! 

Industry Update

 

The Commercial Collection Agency Association reports that through the second quarter of 2011, the number of accounts placed for collection in the previous year is down 18% from the 12 months ending in June of 2010.  

 

The dollars referred to collections are down 16%. 

 

These numbers seem to reflect that industry is experiencing flat sales and is managing their risk well. 

 

Receivables Control

7373 Kirkwood Ct,

Suite 200,

Maple Grove, MN 55369

 

763 315 9600

 

www.RCCmn.com 

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