Receivable/Accounts - Information for Credit and Collection Issues

Thursday, March 27, 2014

Keeping Eggs In Many Baskets

This has been a whirlwind week.  I’ve spent pretty much all of it hearing about Linkedin discontinuing company product pages (and everyone is screaming about losing their valued company recommendations), listening to lawyers argue about what emails will be allowed under the Canada Anti-Spam Lesiglation (CASL), and all sorts of rumblings of change in our industry.   Change can be dangerous, if companies aren’t prepared.

I worked for a collection agency at one point with only two clients – they were big clients, to be sure, but in my first week, I asked “what happens if one of those clients leave?”  I was assured that would never happen.  And then three weeks into my new position, the major client decided they weren’t going to send files to collections in Canada any longer, and we had to shut down the department – I had the unenviable role of restructuring the company and letting some of the staff go.  Eventually the company bounced back and eventually had about 50 clients by the time I moved on, but the recovery from that setback took years to solve.

The old adage, “don’t keep your eggs in one basket” are absolutely correct – if you wish to be the master of your own destiny at your company, you can’t keep your fate in the hands of a single client, telephone provider, sales person, IT manager, or technology – you need to have failsafes in place and diversify your company, just like you would an investment.  This will protect your company from the rocky waters of change.

In the credit and collections world, there are a number of things I’ve seen in my years that went horribly wrong, that can be prevented…

Diversify Your Clients

What happens when your major client representing 60%+ of your revenue calls and tells you they are lowering your contingency rate?  Not much, because they are effectively driving your company rather than you.  It gets worse when they reduce their business, miss a month of assignments, or change the terms under which you can collect.  It’s great when you land a major client, but for long-term stability and prosperity, it’s just a sign you need three more major clients to balance everything out.

In the long term, you also want to diversify across industries.  Video rentals, direct mail order, NSF cheque collection – these all used to be reasonable verticals to be in ten or twenty years ago, and are much smaller now because the world is changing. 

Balance Work and Workforce

One of my early jobs as a collector involved collecting Ministry of Attorney General files – I was given a queue of 150 files.  Being the energetic young collector I was, I called all 150 in a day.  When  I went to my supervisor and asked for more files, they told me there were none, and to call those same 150 files again tomorrow. 

I’ve seen other agencies lay off hundreds of capable and experienced staff when  a client contract ends, or there is a slump in assignments, simply because the agency manned their portfolios to the maximum, and didn’t allow room for variation in assignments.  If you tell your work force they are going from 40 paid hours a week to 36, you are hurting the people who generate your revenue and you count on.  In our industry, work flow can’t always be predicted, so it’s important to man to the point the client is receiving the best service, but at the same time if business ceases to flow there isn’t panic and reactive business decisions that harm the company, such as changing staff levels quickly.

If You Are Renting Space, Can You Get Another Place?

The moaning and gnashing of teeth about Linkedin taking away the company recommendation feature is very loud -- on April 15th, they will no longer show product and service pages, and all the time spent building up recommendations will be lost.  However, it shouldn't surprise us, because we just 'rent' space on Linkedin -- it's not ours, we don't control it.  It's been great while it lasted, and Linkedin is a great tool, but if it's your only tool, again you are making one person (or company) the master of your destiny.  In this specific example, getting recommendations on a variety of social media sites will protect your company from losing all that invested time, and have a place to redirect your loyal customers when Linkedin flips the switch.

Keep A Spare In The Trunk and the Server Room

If you have your collection database crash more than once a year, or go down for more than an hour, why are you not spending a few hundred dollars and a little time to have a ghosted or mirrored copy of your server sitting in the server room?  If something disastrous goes wrong, a couple of switches can be flipped and everything is back up and running.  The alternative is to have dozens if not hundreds of collectors twiddle their thumbs while one or two IT staff scratch their heads and fix things – the cost of that is monstrous.

What Do You Mean The IT Manager Went For Coffee?

If you’ve worked for a medium- or large-sized company, you’ve probably run into this – something crucial and technical breaks down, and your IT manager went to Tim Hortons, leaving no one to fix the problem.  If this happens frequently, it might be a sign that several things are wrong – your technical processes might not be robust enough, you might need to get your IT Manager a company cell phone, and you might need to engage in some cross training.


My point is, you need to be prepared for something to go wrong, and have a failover plan – what would happen if you run an 800-man call centre using a predictive dialer, and it suddenly stopped working?  What happens if a major Financial Institution awards your business to another company?  What if your Operations Manager who you rely on is suddenly hired away by your competition?  These are very real problems that hamper companies, because they didn’t have a plan until the problem happened.

It doesn’t mean living in fear, or being paranoid – it does mean thinking about potential risks to your company, and trying to minimize the bumps in the road that inevitably happen as we try to run our business.

If anyone has some examples of how they protect themselves against disruption and risk, I’d be interested to hear it, either in a comment below or by email at

Thanks kindly,

Blair DeMarco-Wettlaufer
Kingston Data and Credit
Cambridge, Ontario

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