Credit Managers–Going Out on Your Own?

Credit Managers–Going Out on Your Own?
By Robert Holt
How to Evaluate the Resources You’ll Need.

You’ve just been "downsized." Perhaps your company closed or you have put your twenty years in and decided to take the severance and move on. What do you do now?
Have you considered going out on your own? It has never been easier. Technological advancements have helped make the ability to run your own company within reach. The use of e-mail, faxes and enhanced phone systems make the job much easier. In fact, all of the work can be done from a "virtual office" at a home office.

1. Get the Technology
You will need a new computer and printer of course, and you also may wish to get:
• Palm Pilot, for contacts and appointments
• Notebook computer, for traveling to appointments
• Fax/printer/scanner combo to save space
• Phone system with multiple lines – you will need a separate line for faxes and also for speaking directly to debtors on behalf of A/R outsourcing clients.

2.You Will Also Need Software
• An office suite, either Microsoft Office or Word Perfect Office
• A contact management package (ACT! or Goldmine, for example) to set your schedule and compile mailing lists
• A collection program, either one of the canned packages or you may use Act! or Goldmine for this.

3. Consider the Corporate Structure
Speak with your attorney/accountant. You may want to go with an "S" corporation or LLC. This would help to insulate you from potential suits.

4. Get Insurance
You will need general liability insurance to protect from loss of documents, damage, and theft. Professional bonding may be appropriate. You may also wish to consider Errors and Omissions insurance. This is insurance for professionals (accountants, attorneys) to cover mistakes made on behalf of clients. You are an independent professional Credit Manager now. You are in essence "hanging out the shingle." Get the appropriate insurance, bonding, and corporate structure.

5. Who Do You Know?
Over the years, you’ve probably met people from all walks of life:
• Co-workers
• Colleagues at NACM or other trade credit association
• Industry group colleagues
• Clients
• Other professional organizations
• Friends
It’s time to tap into your network. You may find that many people who have come to know you over the years respect your work and integrity and want to help you succeed. They may be only too willing to assist in your efforts and even give you some business.
You will probably need to check any non-compete agreements that you signed with your prior employer. Don’t run away from this, use it. Explain what you are doing, and offer to help with the transition to your successor. Never burn any bridges; your prior employer could be your best referral source!
Also, you will need to market yourself and your new company. Join a professional networking organization, such as Business Network International. This is a group whose sole purpose is to pass qualified referrals to each other, backed by a local and national support system. Another quality group is your local Chamber of Commerce or other business owners association. Go to all of the meetings. Get your name and face out there. Follow up on leads. Help others in your network sphere. Your colleagues will remember you and will want to refer business to a quality individual.

6. What Type of Work?
Here are some options:
• Operate as the credit manager for a few different companies. Many firms may be too small to have a full time credit manager. They still, however, need the assistance that a credit manager can give. The credit manager acts as the "Gatekeeper" to protect from loss. Some smaller firms may need this more than their larger, more experienced competitors.
• Act as the Collection Manager or Collector. Most small companies do not get the best person for this job. Often the Administrative Assistant will also occa sionally make collection calls. They usually do not have the experience, inclination or desire to do this kind of work. Many of us that thrive on collections do so because it is a talent not blessed on many.
• Consulting. Many small-to-medium sized companies have no clue about credit & collections. Your expertise can be invaluable. With a credit & collections department process review, you can conduct a study of the entire process, including order processing, reference checking, credit checking & analysis, and collections. The end result will be a report highlighting concerns, recommendations & suggestions. A third-party review of policies & procedures can be a big help to ensure that this is being handled efficiently.
The independence that is provided by running your own company can be an invaluable source of pride and accomplishment. It is not for everyone; many prefer the security of corporate employment. The hours can be long and disjointed. Failures occur. But it can also be the best career move you have ever made. Give it a shot, it has never been easier.

Robert Holt, President, Baltimore Credit & Collection Services, Inc., started BCCS in 1997. He can be reached at on the web at www.bccs2.com, via e-mail at RHolt@bccs2.com or at 410-549-6444, x201.

How to Hire and Train a Collections Staff

How to Hire and Train a Collections Staff

Aggressive hard-hitting collectors have been favorites for years, but...
(From the September 2000 article in Credit Today)

You have just been selected to open a new collection department office. What type of individual would make a good collector? Someone aggressive, right? A real go-getting, hard hitter that will collect all of the money–and quickly

I submit that this is precisely not the type of person needed. Someone too tough and aggressive runs the risk of alienating your customers and jeopardizing future sales. The objective in collections is to speed up cash flow and reduce DSO.

A heavy hitter might help contribute to a reduction in sales, thus having a corresponding detrimental effect on cash flow and DSO. Further, customer base alienation leads to an alienated sales department.

With unemployment figures of three to four percent, getting good help can be a difficult task. All too often the available candidates have little experience, few skills, and no desire to work in collections. How do you pick winners from the group?

Instead of Traditional Skills, Look for These Qualities

• Problem solver–Some one who does crossword puzzles or reads mystery novels
• Organized–Neat appearance, keeps appointment book
• Friendly–Makes eye contact, personable, pleasant
• Diligent–On time for interview, sends thank-you note
• Task-oriented–Able to implement specific projects that show results.
• Good phone skills
• Good with numbers
• Have a good business sense and an overall understanding of company objectives
• Be able, in essence, to sell.

You’ve Hired Them. What Now?

Okay, now you have a good group of collectors hired for the new department.
Chances are that you have some that have worked in collections in the past and some who are new to the field. Where do you start?

First, teach the shorthand. Collections departments everywhere use a variation of the same shorthand codes: LM, PTP, CB, PP. Make sure everyone knows them, uses them, and knows what they mean. Use anecdotes to describe uses and situations. Make sure everyone uses the same codes, so that the supervisor can track progress and accounts can be reassigned as needed without a hitch.

Next, explain overall company objectives and policies. Make sure everyone understands that he represents the company, and emphasize the team aspect.

Discuss interaction with the sales force. There must be a good working relationship with sales, and a desire not just to increase collections, but to increase overall revenues as well. Inform sales of problem accounts, and work with them to get them resolved. Have the collector suggest to the customer that your salesperson can contact them to resolve open issues.

Next, run through some what-if scenarios. Discuss problems: promises, broken promises, delays, no-return-calls and avoidance. Also discuss resolutions: payment plans, notes, COD plus payment on old invoices, ability to make future shipments. Answer questions, do some role-playing, encourage dynamic thought. Then, let them make some live calls. Initially, sit with them and listen to their procedures and the tone of the calls. Make more suggestions. Ensure good notes are taken and that an on-line tickler file is developed to track promises and follow-ups.

Finally, meet with the group again to compare notes. Did the collectors believe that the calls were successful? What did they learn from the transactions? Allow the group to learn from one another, while moderating and moving the discussion in the right direction.

Some Tips for Success

Consider starting an incentive plan. Of all the collections departments that I have worked in or managed, by far the most successful had the same key element: an incentive plan. Pay a base salary, but add commissions based on exceeding pre-determined goals.

Reductions in DSO and over-90 work well. Set out goals for monthly and quarterly objectives, then raise the bar each quarter to make goals harder to achieve. All goals must be obtainable, but the collector must have to work to reach them.

Also, set team goals and individual goals. Give new collectors smaller accounts to get them started, but ensure there is sufficient incentive to pay larger commissions to those that do more work.

Create a climate for collectors in which they are clamoring for additional accounts. Keep score. Post results. Make it a game. Collections is an integral aspect of credit. Cash flow must be driven to allow all other functions to operate. Let’s face it, collections is not for everyone. Many just don’t want to do this kind of work. But many thrive on being successful at something that most can’t.

Find the right individual and turn them into a Professional Collector.

Robert Holt is President, Baltimore Credit & Collection Services. Telephone 410-549-6444. www.bccs2.com

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