Normally, I try to save my blogs for a Friday, but the back of my brain has been chewing on this subject since I posted on LinkedIn last week. So, mid-week blog!
Years ago, I was invited as an Operations Manager to fly down to New York City to meet with one of our large clients at their head office for the quarterly meeting – every quarter, the president and sales manager would go to NYC, and get grilled by the client, coming home harried (and chase us operations folks for 'more more more!').
This time, they decided to take me – and as expected, the client jumped on us in their board room and tried to give us a hard
time, because we may have been in 1st place out of five different agencies,
but they wanted us to do better … like, a lot better. Like double our recoveries.
'No problem', I said – 'We can do better – but we’ll need more information in the listing file, we need faster responses on file escalations, we need payments made directly to the creditor to be reported daily so we aren’t wasting our time calling people who had already paid, we need your internal finance team to weed out the improperly funded or fraudulent accounts which are about 2% of their inventory before they get assigned to us', and so on. I gave them a long list of things I would need to improve recoveries – I didn’t say I couldn’t, I didn’t make empty promises, I asked for help.
By doing this, I took the power imbalance -- where the client dictates to the agency how the relationship works (first place in recoveries isn't good enough, we need to be ... 'first-er'?), and laid out what I needed from the client to work with them. I didn't create conflict, I wasn't aggressive, I just explained what was necessary in a reciprocal business relationship.
Shockingly, I was never invited back. And the client stopped making crazy demands of the president and the sales manager, and was satisfied with our recoveries from that point forward. And I got a few of the things on my homework list for the client, so everything worked out there.
The Struggle Is Real
So here’s the real problem – many creditors, from their viewpoint, have potential agencies clambering all over each other for the opportunity to act on their behalf. It’s easy for them to say ‘jump’, expecting the agency to ask ‘how high?’ … or even just hover in mid-air until they are given permission to come back down. If an agency can’t collect more, or meet exhaustive reporting or compliance requirements, there’s another agency down the road.
But this is a dangerous road – agencies undercut each other to the point that the commission rates can’t even cover the cost of putting a human being on the paper, and then the client wants to know why liquidation is down. Creditors have learned behaviour that their vendors are subservient rather than partners, and agencies don't always help themselves by vesting all the power in the business relationship to their client, willingly or inadvertently.
So what do we do to avoid these kinds of headaches? We talk about it up front – there’s no reason to not explain to clients what your cost vs revenue model is, what they get for what they pay – if a client is generating the agency $40,000 a month in revenue and they want daily KPI uploads, they should get that. If they are generating $400 a month in revenue, well maybe not … this should be an operations level conversation, not just a sales patter to get the agency's foot in the door, nuts and bolts numbers, processes, KPIs, the whole works.
Too many agencies hurt their business relationships because they try to operate like a black box on an airplane -- impenetrable and mysterious. Some agencies think 'we can't give away our operating secrets!' But these shouldn't be secrets to begin with. What we do isn't rocket science, but agencies do have unique tools, experienced team members, and economies of scale. If an agency is more open about challenges and processes, it can help balance out the relationship and have meaningful conversations.
Are We In This Together Or Not?
Sometimes a client has unreasonable expectations – rather than the agency groveling for business, accepting a losing proposition commission rate, or agreeing to all the reports and meetings in the world, it’s important that agencies should set boundaries with clients. It’s important to explain back-office costs need to be factored in when determining if a client is profitable. It’s essential to explain that a client with small balance files might need to have their work triaged with an email or SMS communication rather than a 20-year collection veteran manually calling small balance accounts, rather route the inbound calls and responses to a team of people to maximize their recoveries and cover their costs. And certainly, now in 2025 at a postage cost of $1.23 CDN a letter, no client should be expecting a wave of five escalating mailed letters on each account any more -- that was something we did in the '90s. Better to talk about how collections will happen up front, so everyone has the same expectations.
Sometimes, even after talking about things at the onset, client-agency relationships can go sideways – a client starts recalling 20% of their accounts as billed in error, or stops reporting direct payments. Assignment volumes go from 2000 new files a month to 300. Sometimes a client gets a new credit manager that comes in with new and wild expectations, like every file must be touched by a human being every 7 days, even though they assign 3rd placement accounts that only liquidate 3%. When things go south, it’s important to let the client know these changes to a successful work flow isn’t a winning formula any more, and give a reasonable expectation on what needs to change to bring the ship upright again.
And, if an agency and a creditor can’t see eye to eye on the work being done and the recoveries being generated, it’s okay to shake hands and part ways. If the relationship isn’t a win-win scenario for both parties, why suffer through it? If everyone has done their best, they’ve explored opportunities for change, and things aren’t changing, time to professionally and amicably wind things up.
Conclusion
So my LinkedIn post talked about me parting ways with a client -- not just because there was a rational ROI problem where the work expected from our agency wouldn't meet the revenue being generated, but because there was a power imbalance in the business relationship. Our former client thought it was okay to berate and belittle my team members, ask for unreasonable reports, and declare that we had done a poor job, when in fact we had recovered over 20% of their portfolio, which was better than that industry and the age of the accounts should have done.
'No problem', I said – 'We can do better – but we’ll need more information in the listing file, we need faster responses on file escalations, we need payments made directly to the creditor to be reported daily so we aren’t wasting our time calling people who had already paid, we need your internal finance team to weed out the improperly funded or fraudulent accounts which are about 2% of their inventory before they get assigned to us', and so on. I gave them a long list of things I would need to improve recoveries – I didn’t say I couldn’t, I didn’t make empty promises, I asked for help.
By doing this, I took the power imbalance -- where the client dictates to the agency how the relationship works (first place in recoveries isn't good enough, we need to be ... 'first-er'?), and laid out what I needed from the client to work with them. I didn't create conflict, I wasn't aggressive, I just explained what was necessary in a reciprocal business relationship.
Shockingly, I was never invited back. And the client stopped making crazy demands of the president and the sales manager, and was satisfied with our recoveries from that point forward. And I got a few of the things on my homework list for the client, so everything worked out there.
The Struggle Is Real
So here’s the real problem – many creditors, from their viewpoint, have potential agencies clambering all over each other for the opportunity to act on their behalf. It’s easy for them to say ‘jump’, expecting the agency to ask ‘how high?’ … or even just hover in mid-air until they are given permission to come back down. If an agency can’t collect more, or meet exhaustive reporting or compliance requirements, there’s another agency down the road.
But this is a dangerous road – agencies undercut each other to the point that the commission rates can’t even cover the cost of putting a human being on the paper, and then the client wants to know why liquidation is down. Creditors have learned behaviour that their vendors are subservient rather than partners, and agencies don't always help themselves by vesting all the power in the business relationship to their client, willingly or inadvertently.
So what do we do to avoid these kinds of headaches? We talk about it up front – there’s no reason to not explain to clients what your cost vs revenue model is, what they get for what they pay – if a client is generating the agency $40,000 a month in revenue and they want daily KPI uploads, they should get that. If they are generating $400 a month in revenue, well maybe not … this should be an operations level conversation, not just a sales patter to get the agency's foot in the door, nuts and bolts numbers, processes, KPIs, the whole works.
Too many agencies hurt their business relationships because they try to operate like a black box on an airplane -- impenetrable and mysterious. Some agencies think 'we can't give away our operating secrets!' But these shouldn't be secrets to begin with. What we do isn't rocket science, but agencies do have unique tools, experienced team members, and economies of scale. If an agency is more open about challenges and processes, it can help balance out the relationship and have meaningful conversations.
Are We In This Together Or Not?
Sometimes a client has unreasonable expectations – rather than the agency groveling for business, accepting a losing proposition commission rate, or agreeing to all the reports and meetings in the world, it’s important that agencies should set boundaries with clients. It’s important to explain back-office costs need to be factored in when determining if a client is profitable. It’s essential to explain that a client with small balance files might need to have their work triaged with an email or SMS communication rather than a 20-year collection veteran manually calling small balance accounts, rather route the inbound calls and responses to a team of people to maximize their recoveries and cover their costs. And certainly, now in 2025 at a postage cost of $1.23 CDN a letter, no client should be expecting a wave of five escalating mailed letters on each account any more -- that was something we did in the '90s. Better to talk about how collections will happen up front, so everyone has the same expectations.
Sometimes, even after talking about things at the onset, client-agency relationships can go sideways – a client starts recalling 20% of their accounts as billed in error, or stops reporting direct payments. Assignment volumes go from 2000 new files a month to 300. Sometimes a client gets a new credit manager that comes in with new and wild expectations, like every file must be touched by a human being every 7 days, even though they assign 3rd placement accounts that only liquidate 3%. When things go south, it’s important to let the client know these changes to a successful work flow isn’t a winning formula any more, and give a reasonable expectation on what needs to change to bring the ship upright again.
And, if an agency and a creditor can’t see eye to eye on the work being done and the recoveries being generated, it’s okay to shake hands and part ways. If the relationship isn’t a win-win scenario for both parties, why suffer through it? If everyone has done their best, they’ve explored opportunities for change, and things aren’t changing, time to professionally and amicably wind things up.
Conclusion
So my LinkedIn post talked about me parting ways with a client -- not just because there was a rational ROI problem where the work expected from our agency wouldn't meet the revenue being generated, but because there was a power imbalance in the business relationship. Our former client thought it was okay to berate and belittle my team members, ask for unreasonable reports, and declare that we had done a poor job, when in fact we had recovered over 20% of their portfolio, which was better than that industry and the age of the accounts should have done.
I could write ten different articles talking about other client-agency
horror stories I've lived through. Clients insisting we
call consumers in a hurricane/flood disaster area rather than date the files off two weeks, clients insisting
files be touched every 7 days by a human being (even $10 trace accounts), clients calling their
agency every week and berating the agency team even when they were doing a
great job, clients insisting they be informed every time a contact attempt is
being made on one of their files – crazy stuff. I've seen it, and when I was a collector or a manager, I had to suffer through it. I’m fortunate in the last 13 years that I am in a position managing my own agency where I can be
honest with our clients and try to avoid power struggles and focus on solutions
and strategies to get everyone what they want, or walk away from imbalanced client-agency relationships.
Got a client giving you grief? Got an agency that won’t deliver on reasonable back office requests? Got a horror story you want to share? Drop me a line at blair@receivableaccounts.com.
Got a client giving you grief? Got an agency that won’t deliver on reasonable back office requests? Got a horror story you want to share? Drop me a line at blair@receivableaccounts.com.
B
KINGSTON Data & Credit
Cambridge, Ontario
226-946-1730
blair@receivableaccounts.com
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