Receivable/Accounts - Information for Credit and Collection Issues

Friday, April 5, 2019

Month End In A Collection Agency Isn’t Important

For all the years I’ve been in collections, my colleagues always say ‘have a good month end’, or ‘it’s time for the big month end push!’.  For most of my years in this business, I’ve always expected month end to be a time of crazy activity, papers flying, deals closing, a time of high excitement.

Except this past month end came and went last Friday, and it occurred to me it wasn’t any of those things, and for the most part hasn't been for a long time, and that struck me as a good thing.

Collection agencies run on monthly cycles, and yes the end of the cycle is important – but it shouldn’t be too frantic or action-packed.  If it is, it means that the rest of the cycle (the first 20-odd business days of the month) weren’t well spent.  If everything has gone right, the last day of the month should be more or less like every other day that month.

I am sure a number of agency owners are going to disagree with me on this, but let’s look at what has changed over the last decade or so to make month end no special thing.

Payments Are Now Instantaneous

In the good old days, the mail was the primary method of payment – and it had a 3-7 day delay on arriving in the agency hands after being put in the mail (if it even was mailed in the first place).  So naturally, to speed up that cycle, couriers would be sent out for big payments, or even sales managers or drivers were sent to pick up cheques.  Debtors were pushed to do wire transfers or sent to Western Union, and the little WU printer in the back of the office would bang out cheques to be rushed to the bank.

For our month end, it was last Friday, so many of the collection team took their early day and left at 3pm, and the payments kept coming in, because Interac e-Transfers were automatically deposited into our trust account right up to midnight.  Consumers and businesses paying by credit card on our company website were processed in live time.  Online bill payments went in the daily batch into our trust account at the end of the day.  It didn’t require drivers, couriers, or frantic trips to the bank.  And the mail that arrived on the last day of the month represented only 6% of our payments.

Month End Targets May Be The Problem

Part of the last minute panic might be because the company is behind target – but how do these targets get set?  Is the collection agency running so tight to the wire that they are only generating a 5% (or less) profit margin?  If that’s the case, that means one bad day (like the last day of the month) can sink a month.  Is that the best way to run a business?  If the agency can curtail a lot of ‘black hole’ expenses such as software, middle management, technology, sales and marketing (where they can swallow up an inordinate amount of the agency’s top line revenue) then the agency will be profitable regardless of size.

The other thing to watch is the type of clientele – most agencies salivate over bank paper, but with extraordinarily high average balances and low file counts and low contingency rates, every single payment in full that comes in carries a ridiculous amount of weight to whether the agency makes or breaks their overhead costs.  Lower average balance paper may not be as glamorous, but it creates a steady stream of revenue through the month that can be the foundation of a solid month of revenue, and when those big payments come in, they are icing on the cake, not a plank to cling to for survival.

As well, is your team experienced?  Do you place trust in them?  Can you avoid the rotating door of letting staff go?  If month end is a make-or-break situation for your employees keeping their jobs, that's going to add to stress but not success for everyone.

When the big payments come in, it should be exciting and high fives should be passed around, but that should be the same any day of the month.

Month Beginning Is Way More Important

I can tell you, this week has been a madhouse for me.  Because it’s month beginning.  There haven’t been enough hours in the day, and this is my new ‘month end scramble’ for the past couple of years.  Why?  Because looking forward and growing your agency is far more important than scrambling for survival.

We run an Agile Management environment, which involves an end-of-cycle review of the previous month, and we ask ‘What Went Right?  What Went Wrong?  What Can We Do Better?’  Each of our branches holds a meeting asking these questions, and sends out a company-wide email.  What it does is builds a short term 30-day goal (or Sprint, in Agile lingo) of database improvements, strategy changes, manpower shuffling, or manual updates.  It also looks at problems in a slightly arm’s length viewpoint, and lets us set up ways to prevent bad things from happening going forward.  In short, it’s learning from our experiences, instead of accepting the same-old, same-old. 

Secondly, if we are being successful, it lets us plan capital improvements for the company – improved health plan coverage, new servers, perks for the entire team like company golf shirts, planning who will  go to upcoming conferences or business network meetings or training sessions, these are all good things, and keep the momentum of the company going.

Also, if the agency isn’t stagnant, it means that new clients are coming on, new staff are being hired, newer staff are being mentored, and experienced staff are building their teams for their portfolios.  That’s all frantic activity as well, but in the best way.


If month end is a madhouse, and you are developing ulcers over hitting targets and paying the bills, the collection staff are all stressed out, and no one is enjoying their work, it might be worth taking a step back and seeing if there’s a big picture problem that could be solved.  The last two companies I worked at I came home on month end utterly exhausted and emotionally drained, and looking back, I could have solved the issues in six months by looking at the big picture and getting the agency owners to buy into a company restructuring and eliminating wasteful expenditures.  But hindsight is 20/20.

So, agree with me?  Think I’m way off base?  Send me an email or comment on my blog.  Happy to hear different viewpoints.

Thanks kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, Ontario

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