Research

Recession strikes the United States roughly once every 10 years and delivers a lethal blow, particularly to the startups and small businesses. No one can predict the exact timing or the length of a recession. Currently, the coronavirus pandemic is already wreaking havoc on businesses of all sizes.

During these tough times, buyers disappear, many of your clients will cut their budgets, downsize or discontinue several services or products that they use. Small businesses which survive this downturn are the ones who certainly experience an exponential growth once the economy starts to turn around. Since many of your competitors will bundle up during the recession, it creates a huge vacuum when the demand starts to pick up again. Therefore, recession can actually be an opportunity for growth for those who sail through these rough seas.

• Hire a Debt Collection Agency to recover money from unpaid bills of customers who you have already serviced. This should be done quickly because of the financial condition of most people starts to incrementally-deteriorate as time passes by.
• Accumulate or secure enough working capital, set up a cash flow planner. Best time to secure financing is before a downturn hits, plan in advance.
• Hold daily scrums (short group meetings), let everyone speak up what they did and plan to do in the following days. This also helps to boost the productivity of employees.
• Reducing headcount should be done judiciously. In-fact you can hire the top talent who has been laid off from your competitors.
• Take your accounts receivable very seriously, hire a Debt Collections Agency. People are less likely to pay if the recession prolongs, so act quickly and shorten your receivables cycle. Instead of waiting 90 days, transfer accounts to collections after 60 days after the payment was due.
• Maintain or improve your credit rating. Small business loans are often among the first to disappear during a recession. Use debt or lines of credit very sensibly. Curb non-essential spending. 
• Do not fire your marketing staff. They are your wings. Trim if really needed. Look for low-cost marketing options like digital marketing.
• Keep communicating with your customers. Their requirements might have changed versus a year back. Instead of reducing the price of your product, throw in more features. This is the time to offer more not less. Additionally, keep your clients informed of your other products and services.
• Start a business referral policy with your existing clients, reward them when you succeed in winning that customer.
• Go above and beyond, which may include courtesy calls to your clients. In good times a client is like your business partner, but during hard times he is your God.
• Expand internationally if you can. Last recession (Great recession of 2008-2010) impacted USA severely but was not so bad for many foreign countries.
• Delay unnecessary purchases like new laptops or furniture. Think about ways to reduce inventory costs.
• Negotiate concessions from your own service providers and suppliers. They don’t want to lose you either during a recession. Can you get the same item or service for a better price?
• Prepare for better times. Have a strategy to scale up when new orders pick up.
• Sometimes during the recession, the damage happens from inside by ill-informed employees spread negative news about your company to other employees and customers. If things are under control and you have a proper plan and vision, then share it with your employees so that they think and talk positively about the company.
• Diversify your services and product in good times, so that entire business is not impacted adversely.  But during the recession, focus more only on your core business expertise and those areas which are most profitable.

If you are looking for a Collection Agency to assist with your accounts receivable: Contact us

Being in the accounts receivable industry, we interact with customers all the time, often personally over a cup of a coffee. Nearly all small businesses are constantly looking for ways to increase profits quickly, without increasing costs or by taking drastic measures.

Here are the ten simple changes you can incorporate easily to increase sales, cut costs, increase profits and recover your own money. 

1. Handle Account Receivables Efficiently:

• This is the money which should have already come to you. Having a proper plan to address past-due accounts will immediately improve your cash flow and profitability.
• Most businesses do not have their own sufficiently trained staff and tools to recover money, and it is a lot cheaper to transfer accounts to a reputable third-party Collection Agency.
• Nearly all our small business clients are pleasantly surprised how much of a difference it makes when this unexpected cash is infused from accounts which they had virtually written off from their books. Some clients were just a bit non-serious about transferring accounts to a Collections Agency after 60-90 days of non-payment. Click here to find the cost of hiring a collections agency.
• Charging a late fee is a great way to encourage clients to make payments on time.

2. Cost Cutting:

• Cost-cutting does not always mean laying off people.
• If your small business is experiencing a temporary slowdown or you need extra cash to be infused to improve your profits, then do a deep review if you are overspending on the services subscribed. May be you can you downgrade that service plan by one notch and work nearly the same way. 
• You have possibly leased out too much office space. 
• May be you can turn off that air-conditioner of the conference room which is hardly used. 
• Those magazines, industry publications or that cable TV connection can be canceled which no one uses. 
• May be the frequency of your cleaning crew can be reduced by half. 
• Have you been taking advantages of all the tax breaks that you can qualify for. Asset depreciation is a big tax break which many businesses overlook.
• A careful assessment of maintenance contracts or warranties that you have subscribed.

3. Increase your rates:

• Have the cost of your raw materiel increased recently, yet you have been absorbing those costs without passing on to your customers?
• May be you are undercharging compared to your competitors in your geographic area.
• If you genuinely explain customers the underlying reason for your own increase in operational costs, most of them would be willing to accommodate a 2% to 10% increase, and will likely not threaten to leave you.

4. Are you being overcharged?

• Can you get the same raw materiel from a different supplier for a lower rate or online? 
• Reduce the logistics cost by selecting someone nearby.
• Or may be you can re-negotiate with your existing supplier to lower his costs giving references of other suppliers you just researched.

5. Bigger and repeat orders:

• Is your sales team concentrating only to bring in new business and forgetting about reorders from existing clients?
• Yes, clients often forget to reorder them-self until someone reminds them.
• May be their own business has been doing quite well and can easily place a larger order than last time.
• Why don’t you reach out to your old customers who have stopped using your service a while back, offer them special promotions to re-board.

6. Using technology efficiently

• A very simple example is that fax machine which breaks down twice a year or requires servicing or ink refill. Ditch that and go with online fax services which charge as little as $5 per month for unlimited faxes.
• Paying for toll-free numbers from traditional land-line providers can be a rip-off. Newer providers like Grasshopper and Mightly Call are super cheap and provide tons of free add-ons, for which you might have been paying a premium price with your existing provider.
• May be your website hosting provider is too costly, prices of cloud hosting have dropped significantly in the last few years and new providers often transfer your website to their platform for free.
• Your IT costs could be unnecessarily high too. 
• Even big businesses have started using WordPress for hosting their websites and online stores. WordPress is super-duper cheap to setup and run. It can be integrated with almost anything you can imagine and software/security upgrades are almost always free. Godaddy and Amazon Web Services are my personal recommendations.

7. Online advertisement for sales:

• Facebook Advertising and Google Adwords are excellent places to find new customers. To be honest, you do not need to hire anyone to do this for you, it is very easy. Watch a few online video’s and you will be good to go.
• Instead of hiring a new salesperson, you can get five times more sales leads by doing targeted advertising on these Google/Facebook platforms. Do not be fearful of trying these out, you can set monthly budgets, and these online platforms will never charge you beyond that. Start small and then increase budgets once you become more comfortable using them.
• Higher sales will drastically increase profits quickly for your small business with this one simple change. 

8. Boost operational efficiency:

• Are those daily/weekly meetings really helping you?
• Can your receptionist or a clerk who is not being 100% utilized take care of some additional tasks.
• Is your inventory system automated? Labor-intensive tasks are more prone to mistakes.
• Are you using a cost-effective accounting software? In recent years, provides like Zoho have been offering the same services like the big guys but at half the price.
• Ask your employees how your office efficiency can be improved or unnecessary costs can be cut, give rewards ( like gift cards) for those brilliant ideas which you decide to adopt.

9. Offer long term plans:

• If a significant portion of your customers utilize your services only for a few months and leave, offer a discounted yearly plan if they pay upfront.
• You will get more money from the same client, and probably after one year, they will love your service so much that they will renew your service again. 

10. Be Certified:

• Those accreditations, licenses, and certifications may be easy to get and may appear to carry no value. But they play a huge role in gaining the trust of potential clients who do not know you but believe in those certifications.
• Make strategic alliances with other companies so that your clients can get more services under one platform.

Here is the list of the largest debt collection agencies in the United States. Each collection company has its own set of strengths. 

1. Transworld Systems Inc (TSI)

TSI has been the biggest collection agency for quite some time now. It also has Rocket Receivables and TSI commercial divisions. It has been serving the USA’s collection industry for nearly half a century now. Subsidiaries include NCO Group and North Shore agency. Their website states that TSI manages a portfolio of over 25 billion and over 35,000 clients. The corporate office is located at Fort Ross, IL. In the year 2019, TSI also acquired NCI ( Altisource), making it an even bigger player.

Need a Commercial collection agency with 20 years of experience? Contact Us

2. The Kaplan Group

One of the largest commercial collection company in the USA. The owner, Dean Kaplan has 30 years of business and negotiating experience, has closed over $500 million of transactions (per Linkedin), has an MBA from a top 5 university. 85% Success Rate on viable claims over $10,000.


3. Midland Credit Management (MCM)/ Encore Capital Group Inc.

Encore Capital Group is a global specialty finance company with 66 years of operating experience and has over 8,500 employees across 17 countries. Through its subsidiaries, Encore purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Location San Diego, CA.

4. Portfolio Recovery Associates (PRA Group)

PRA Group (Nasdaq: PRAA) began in 1996 as Portfolio Recovery Associates, headquartered in Norfolk, Virginia. Over the past 20 years, PRA, through its subsidiaries, has grown to become one of the largest debt buyers in the world, with more than 5,700 employees in 16 countries throughout the Americas and Europe. They also do business as Encore Capital Group.

5. LVNV Funding

LVNV performs debt collection through its wholly-owned subsidiaries Resurgent, Alegis Group, Sherman Financial, Pinnacle Financial Group and many others.

6. Alorica Inc. / EGS

Alorica Inc. is the holding company of various direct and indirect subsidiaries, including EGS Financial Care, Inc. (EGS FC), Systems & Services Technologies, Inc. (SST), and Global Receivables Solutions, Inc. (GRSI). EGS FC and GRSI are licensed debt collectors, and SST provides back-office receivables services. Many of Alorica Inc.’s subsidiaries operate under the brand, Alorica, but all remain separate legal entities.

7. Altus GTS Inc.
Per their website, Altus is the largest commercial collection agency in North America.

8. Weltman, Weinberg & Reis

Weltman, Weinberg & Reis is a large Cleveland-based collection law firm.

Other large collection agencies include.
– Enhanced Recovery Company (ERC)
– NCB Management Services
– Nationwide Credit (NCI) / ALTISOURCE / American Creditors Bureau
– Harris and Harris
– Suburban Credit Corporation
– CBE Group Inc
– IC System
– ConServe
– Pioneer Credit Recovery
– Performant Recovery Inc (Premiere Credit of North America)
– AFNI Collections
– AARGON Collections
– Alliance One

A bigger collection agency does not always mean that it is better. We can assist you to choose a good one based on your specific requirements based on our experience and opinion.

Most collection agencies are private entities, and their revenue is not often disclosed. We have compiled this list based on many parameters out of the internet – employee size, companies that report revenue, complaints, etc.. and believe that this list is nearly accurate. To help us improve this article (in case we have missed out any), email us at support@nexacollect.com. The list above is not sorted by their size.

Collections industry which was perceived to be slow in adapting the latest technologies has completely transformed itself in the last decade. Today the biggest players in the industry are fiercely competing in terms of SEO, Adwords, partnering with software providers, Digital marketing, PCI compliance, Web Services etc.

Little by little, lots of things have gradually evolved in front of our eyes:

1. Everything is going DIGITAL instead of manual/paper trail.

In the early 2000’s years, majority of tasks in the collection industry were manual. Almost 99% of the accounts that were submitted for debt collections came in by Fax and Snail Mail ( regular postal mail). These accounts were then manually processed by data entry operators or clerks into their internal desktop systems, which were then processed by Mainframe systems or other customized apps.

A decade later, everything has changed. Today, nearly all large to medium sized Collection Agencies have their own website to accept collection accounts. It’s way more cheaper and faster. The collection activity starts the very next day the accounts are submitted online. This is a win-win situation for both Clients and the Collection Agencies. Clients can have their accounts serviced faster and get real time online performance reporting, at the same time the Agencies have been able to reduce their back-end costs which were earlier manual in nature.

Due to digitization of data, it is a lot more easier to perform batch operations on a large number of accounts efficiently and accurately. If an agency has a high volume of accounts and latest technology by their side, they can easily cut their costs and put smaller players out of competition. Compare this scenario to what Amazon does, they have cut prices so drastically that it is extremely hard for a smaller rivals to compete.

2. Collection Agency and Software vendors tie-ups are growing:

These days most clients use standard software products like Quickbooks for accounting. Many dental practitioners use standard software products like Dentrix/Debtimax to manage their patients booking and accounting. Today, many of these software vendors have now integrated their software with collection agencies, so that the delinquent accounts from their system can be transferred for collections if their client wishes so. Its a win-win-win situation for all 3 parties. Client does not need to extract the data and submit accounts separately to a collections industry, Software vendor has another feature for their platform and obviously the Collection Agency gets more accounts as well. These software vendors will usually do tie-up with more than one agency to give their clients a choice.  All this is taking a bite out of the business of smaller collection agencies.

Collection agencies who are not able to directly tie-up with software vendors, often get their own custom extractor software built, but it is harder and expensive to maintain in a long term.

Thanks to this digitization, today the clients are not restricted to select an agency which is closer to their physical location, but can now shortlist any Collection Agency nationwide which gives them a better deal or a better service level.

3. Size Matters when it comes Automation and Outsourcing

Bigger Collection Agencies are able to reduce costs due to the large volume they deal in. Already, when you submit an account today for Collections Letters, everything from debtor’s address check to sending of Demand Letters is automated in most larger agencies. In fact, even a considerable percentage of Collection Calls had been automated with the help of Robo calls until recently, till it was stopped by the courts.

Services being provided to US clients is going global:
Bigger agencies able to further reduce costs by outsourcing their Collection Calls by setting up an back-end office in a low cost country like Philippines where a well educated and trained staff is able to speak excellent English in (near) U.S. accent. These outsourced offices can not only handle Collection Calls but can also provide services like Accounting, Client Support, Sales Support and many more. Cost of these centers is far lower than their US counterparts.

Leasing office space and hiring/training people in a foreign country is nearly impossible for a smaller collection agency. Now include Licencing costs, Insurance costs, Equipment cost, Compliance cost and Software development cost. Factor in these costs/overheads to per account which is serviced. For larger Collection Agencies this cost is a lot lower per account. As the bigger agencies with their deeper pockets keep becoming more and more global and technologically savvy, they will starve smaller agencies for new business.

4. Artificial Intelligence (AI) and Data Analytics:

Ok, this is a little futuristic but not too far off. Once credit history and FICO score was considered as the main criteria to gauge an individual’s financial situation. Newer technologies which involve Data Analytics, will be able to better predict how easy or hard will it be to collect money from an individual. They may even give an idea about an individual’s spending habits, assets and other liabilities. Collection agencies will then be able serve accounts with the appropriate intensity and settlement terms. Thanks to AI, Predictive Analytics and Data Analytics.

Where does all the data about debtors come from (for AI to work on)?

Ever signed up for a store membership? All your information is stored and shared with “Partner” companies. Now think about all these electronic phone bills, utility records, loan records, club memberships, online shopping…. everything is stored in digital records.

Not all, but lot of these companies share your data with their partner/3rd party firms. Overall it is hard to know where all this digital information eventually flows, but large chunks of this data will land up with Data Aggregator companies from the above mentioned sources. This information is perfect for data analysis or analytics. Algorithms of AI help to put all these little pieces of information together providing very valuable information about a person for a collection agency.

5. What about the Collection Law firms?

Thankfully the work of judges and court proceedings will continue to require attorney’s physical presence for the foreseeable future. Therefore the collection law firms are relatively safer, but not immune. Increasingly bigger law firms can train assistants at the low cost locations globally, even outside USA. There is almost no clerical work which cannot be done outside USA. Your legal file can easily be prepared at an outsourced location by a trained subject matter expert.

The main lawyer is there only to do a final proof-read/assessment and/or do the final signature.

Conclusion:
Only the smartest, largest and technology savvy will survive. We are likely looking at consolidation in collections industry in the coming years. Newer players would need out-of-the box ideas to compete with the bigger players and sufficient funding to get them going for a while.

This is Nexa’s own in-house analysis and we have shared our rationale behind it in the above article. Please email us at support@nexacollect.com for your feedback.