COLLECTION TRENDS
The Shrinking Dollar: What Happens When There Is A Delay in placing accounts for collections?
Cash flow is the engine that drives businesses large and small. Delinquent accounts are the brakes that bring companies to a screeching halt. The economic exigencies of recent years has pushed many companies to extend the time they will permit an accounts receivable to age prior to instituting formal collection efforts. Based on a survey of members of the Commercial Collection Agency Section of the Commercial Law League of America (CCAS), and information supplied by the U.S. Department of Commerce, this "loosening" of payment requirements may be severely impacting on companies' cash flow and bottom line.
According to the survey results, the probability of full collection on a delinquent account drops dramatically with the length of delinquency. For example, even after only three months, the probability is that you will collect only 90¢ of each dollar delinquent. After six months, only 67¢ of every dollar will be collected or about 7 in 10 accounts.
And after one year, the best expectation is that only 46¢ of every delinquent dollar will ever be collected. The results of the surveys clearly demonstrate the critical importance of taking positive action when an accounts receivable ages past its due date. Mr. Frank Uhlman, Executive Director of the Commercial Collection Agency Section noted, "Today's competitive economy requires that companies maintain a healthy cash flow with the ability to adapt to constantly changing market conditions. This is true whether you are in the printing industry or a company in the silicon valley. Delinquent accounts, if they are permitted to age, can wreak havoc on a company's liquidity, as well as tie up management and staff time that could be put to far better use. Companies must take a hard line on past due receivables, and turn to professional help when their internal efforts have not proved successful."
Too often companies put off placing an account for collections because they don’t want to pay the agency’s fee. This “one last call” mentality as you can see from the chart above only increases the possibility that an account will have to be written off. Now, instead of paying a nominal fee and getting most of their money back, these companies who are slow to act end up getting 100% of nothing dramatically effecting their quarterly and annual revenues.
The CCAS survey polled the over 110 members of the Commercial Collection Agency Section, who in aggregate handle a substantial portion of claims placed with professional commercial collection agencies in the United States. In the first three quarters of 2008, the agencies of the CCAS handled over $6.4 billion in commercial claims. The trends are evident, regardless of the company's industry or size.
The amount of money collected is directly proportional to the age of the account at time of placement!
Cash flow is the engine that drives businesses large and small. Delinquent accounts are the brakes that bring companies to a screeching halt. The economic exigencies of recent years has pushed many companies to extend the time they will permit an accounts receivable to age prior to instituting formal collection efforts. Based on a survey of members of the Commercial Collection Agency Section of the Commercial Law League of America (CCAS), and information supplied by the U.S. Department of Commerce, this "loosening" of payment requirements may be severely impacting on companies' cash flow and bottom line.
According to the survey results, the probability of full collection on a delinquent account drops dramatically with the length of delinquency. For example, even after only three months, the probability is that you will collect only 90¢ of each dollar delinquent. After six months, only 67¢ of every dollar will be collected or about 7 in 10 accounts.
And after one year, the best expectation is that only 46¢ of every delinquent dollar will ever be collected. The results of the surveys clearly demonstrate the critical importance of taking positive action when an accounts receivable ages past its due date. Mr. Frank Uhlman, Executive Director of the Commercial Collection Agency Section noted, "Today's competitive economy requires that companies maintain a healthy cash flow with the ability to adapt to constantly changing market conditions. This is true whether you are in the printing industry or a company in the silicon valley. Delinquent accounts, if they are permitted to age, can wreak havoc on a company's liquidity, as well as tie up management and staff time that could be put to far better use. Companies must take a hard line on past due receivables, and turn to professional help when their internal efforts have not proved successful."
Too often companies put off placing an account for collections because they don’t want to pay the agency’s fee. This “one last call” mentality as you can see from the chart above only increases the possibility that an account will have to be written off. Now, instead of paying a nominal fee and getting most of their money back, these companies who are slow to act end up getting 100% of nothing dramatically effecting their quarterly and annual revenues.
The CCAS survey polled the over 110 members of the Commercial Collection Agency Section, who in aggregate handle a substantial portion of claims placed with professional commercial collection agencies in the United States. In the first three quarters of 2008, the agencies of the CCAS handled over $6.4 billion in commercial claims. The trends are evident, regardless of the company's industry or size.
The amount of money collected is directly proportional to the age of the account at time of placement!