Credit Management and Total Quality Management As a debt collector, give feedback to your client


The debt collector’s practice shows that the ability of a company to perform quality in all aspects of its trade is the main factor to success. This is true for any company, small or big in all types of trade all over the world.

This daily experience confirms what one of my teachers at the University of Leuven (Belgium) explained at a time I was barely listening: to measure the global company performance one should multiply the individual performances of the company’s functions (and not just add them). Let us take a company with three functions being production, sales and administration. Let us assume this company is excellent in production and sales [10/10] but very poor in administration [1/10]. Its global performance is [10x10x1]/[10x10x10], hence 100/1000 or 1/10. Such result suggests bankruptcy looming ahead in the short future. If we considered a sum, we would get [10+10+1]/[10+10+10] or 7/10 mark which would be a wrongly soothing quote.

To send a rocket scientists use such multiplication reasoning: to assess the probability that the rocket succeeds it flight, they multiply the probabilities of success, and they don’t add them. Should they add them, we wouldn’t have any satellites for our TV’s and telephones.

Such reasoning shows as well that an average quality in each function leads to failure: [5x5x5]/1000 = 125/1000 in our example. It would need 8/10 in each function for our company to get a global 5/10 mark. I am so happy my teachers didn’t apply such system when I was a schoolboy!

Such results apply directly to a company’s life. If you sell performing products (or services) efficiently but your invoices are not sent or incorrect, your cash flow will be severely reduced. You will merely survive where you should thrive although numerous clients would demand your product, would be delivered and willing to pay.

This reasoning is usually well known and easy to understand. However, many a manager tends to forget about it when it comes to tackle difficult or tedious processes or issues. When I first started in a Fortune 500 company’s subsidiary (800 employees), administration was not much considered. Insufficient resources were allocated to these tasks, not to speak about the debt collection itself. The management’s attention was focused on the turnover while little attention was driven to improve the cash flow. This trend was not peculiar to that company some 20 years ago. However, the situation has changed. Such evolution was forced by a change in the overall investment return. It became obvious that improvement was to be sought not only in sales and marketing efforts but also in other processes. Moreover, more and more clients developed a tendency to pay later either because they saw it fuelled their treasury or because their solvency was poorer.

Hence a necessity to develop quality in the administration processes. In that respect, much is done in terms of reasoning and theoretical analysis. Regular talks with credit managers show to me that they don’t use complaints management as much as they could. A client complaint is a gift to your company. It provides you with much information. Whether the complaint is founded or not, the complainer will always focus on your weaknesses. This includes your product/service but also your ability to deliver sub-services like repairing a product or forwarding an appropriate credit note.

A complaint (whether from a client or from another department of your own company) is an opportunity to increase profitability at short, medium and long term. A professional manager has no choice but to take it. He should organize the complaints management in terms of welcome to the complainant. There is no need to agree with the complainant if he is wrong in your eyes. It is however paramount to listen to his story and to reflect to him that he’s (she’s) taken seriously. Bear in mind that is more expensive to make a new customer than to keep an existing one. Organize the complaints team so as to recommend concrete actions and implement and verify the results.

As a debt collector, I can acknowledge these reasoning regularly. Many clients are not unwilling to pay but will not unless they get a clear invoice at the right address for the product/service they’ve ordered and received. It is even more important for the ill payers: they will use any mistake to elude payment, including a weak reminders system or a poor follow up.

One would imagine it is not very smart from a debt collector to advise his client to organize better and consequently reduce the number of debts he’ll transfer to his debt collection partner. However, my daily work shows that it is far better and more profitable to work for an organized client. Indeed, you know his procedures are reliable, you know the invoice matches the client’s order, you know reminders have been sent, you know there is no payment that would have gone lost in the creditor’s clients accounts. Hence you can do your job and collect. You’re not stuck between debtors whose good will seems real and a creditor whose response is poor.

However difficult it might be to tell a creditor that part of his problem is in his own management of his receivables, I view it is one of the debt collector’s tasks and value added to his client. If done with diplomacy, such information is greatly valued by our clients.

It is also quite easy for the debt collector to assess the quality of prevention tasks the client should perform on his clients (solvency assessment etc.). Too much risk and he goes bust, too prudent and he looses “good turnover”. We are all in the business (or should I say the art) of mastering what is likely to happen in order to manage the unpredictable.

Concluding, the debt collector can add value to his client’s performance by a good feedback on this client’s processes. In doing so he will get closer ties with his client and will get better debts to collect. By improving the client’s overall performance, he will help growth in the client’s business and consequently the volume of his own business.

Etienne van der Vaeren

Etienne van der Vaeren is a Honorary Chairman of TCM Group International, Ltd.; CEO of TCM Belgium s.a.; President of the Belgian Collectors Association and former Director of the ACA International (USA) and former Chairman of the ACA International’s International Unit.


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