RAP IT UP

The following article by Stu Brenner and Jon R. Lunn of SKO-Brenner-American was published in The Commercial Law Journal of The Commercial Law League of America. Stuart Brenner has been a League member since 1965 and Jon Lunn is a past president of The Commercial Collection Agency Section and past member of the Board of Governors of The Commercial Law League of America. Mr. Brenner is Chairman & Chief Executive Officer of SKO-Brenner-American and Mr.Lunn serves as Vice Chairman and Chief Operating Officer.

AGENCIES AND THE COMMERCIAL COLLECTION PROCESS

While attending various Commercial Law League functions and meetings, we have been repeatedly asked various questions regarding the nature of our business. What services does an agency provide? How does an agency market its services? How does an agency get new clients? What does an agency do before referring an account to an attorney? The following is designed to provide answers to those questions regarding various aspects of our business.

Visibility. During these times of increased economic awareness, business professionals are forced to focus greater attention on the collection function. Collection agencies are now being put to the ultimate test. Agencies have to respond to today's business dynamics by developing the art of a "collection sense" which can only be fine-tunes through years of experience.

Credentials.In an effort to service their clients, many agency people meet with them regularly. They visit their offices, speak with their management and collection staff in attempt to better educate all with regard to the benefits of collection management and timely placement. After all, timing is the most important factor when determining when to place an account for collection.
Some agencies frequently attend and/or sponsor credit or collection business interchange groups. There is substantial effort involved in developing new clientele as the credit grantor of today is more sophisticated and aware of the responsibility and fiduciary trust placed in the agency. Some examples of the above are:

• Being required to provide proof of bonding
• Providing a list of clients that the agency represents in a particular industry
• Willingness to share the agency's financial statement
• Putting on in-house seminars and educational programs
• Offering a variety of services including letter and pre-collect services
• Demonstrating that there is up-to-date computer technology available to accept accounts
• Providing the creditor access to the agency's computer system data so the client can monitor the agency's collection effort as it takes place

Pre-Collect. Another sales tool used by the agency is an initial pre-collection service called "Free-Demand." This consists of a written demand on agency letterhead advising an account that "unless a check is received by a certain date, collection activity will begin." If the account pays, there is no charge made by the agency, hence the term "Free Demand," Experience shows that checks may be received a good percentage of the time, depending on the industry, age of the account at time of placement, and the nature of the product or service involved. However, accounts that remain unpaid have also said something; by remaining silent, they have thus confirmed that they are the collection problems. Accounts that don't pay within "Free Demand" are the ones most in need of the most vigorous agency action. This service acts like a barometer and decision maker in determining which accounts to send collection.

Agencies should be consulted for the advice and guidance. The agency stands ready to think through problems with its clients. It is called upon to act as an extension of a credit or collection department in much the same way that an advertising agency assists a company's advertising department or a public relations firm assists a company's publicity department.

In addition to consulting services, letter writing services and account receivables management services, the personnel of a collection agency spend the majority of their time doing what they do best: collecting money. They are constantly forced to innovate, test new ideas, be creative and receptive to change. New ways must always be sought to approach a collection problem. Agencies do not expect to receive an account before the creditor has exerted his own extensive efforts to effect recovery. It should be able to pick up where a creditor leaves off and move forward, much like passing the baton in a relay race. Maintaining the continuity of the collection effort is vital to timely success.