Collection Agencies and Strategic Plans – 1 Of 3
By Dean Kaplan+
Strategic planning can be appropriate for a large company, a department within a company, a smaller company and collection agencies. This article is the first in a three part series and will focus on why you should develop a strategic plan for the credit department. Strategic planning is a good idea in any type of economy, but it can be particularly important and effective during tough economic times, such as what we are experiencing right now. Strategic planning typically involves evaluating how things are at present, setting a longer-term goal and then determining what needs to be done currently and into the future to accomplish the goal.
You might be asking yourself, why do I need to create a strategic plan for my credit department? Well, there are several very important reasons why this is a good idea. The first is that it is critical for every department to be in sync with the company as a whole. This means that any goals a department has must support whatever the company’s bigger goals are. In the case of the credit department, strategic goals will likely involve controlling and minimizing credit risks, achieving a specified percentage of account receivable collections, etc. How these goals are affected by the company’s bigger goals needs to be assessed. For example, if the company plans to increase its customer base by a certain percent, how will this affect the credit department’s ability to assess the credit worthiness of these new customers, monitor accounts receivable patterns, make adjustments, and make necessary debt collections? Can the current staff handle this additional workload? Future hiring is just one aspect that may be impacted by long-term company goals.
Obviously, if the credit department or any department for that matter does not stay in sync with the company’s overall strategic plans, this will create a myriad of problems for the department. If the company succeeds in bringing in the forecasted number of new customers, and the credit department continues to do business as usual, will their staff be able to handle the added workload? Will the current computer database be up to the task of the added data input and processing? If the answer to these questions is no, the credit department will be in catch up mode all of the time. They will always be running one step behind. This is a catch 22 because not only will they be constantly behind the eight-ball, but there will be no time available for the department to figure out how to become more efficient and better able to handle the new demands. This will result in lower productivity and morale. Clearly, this is not a smart strategy for any department to follow.
The final reason for the credit department to put together a strategic plan follows directly from the downward spiral just described. In today’s business climate, less is more. In other words, companies are constantly on the look-out for ways to improve efficiency and productivity, all for fewer dollars spent. Usually this means that some functions are eliminated, while the responsibilities continue. The responsibilities are absorbed by other ongoing functional areas within the company. For a credit manager, this could mean that the credit department’s functions might be absorbed into the bigger finance department for example, and many credit department positions eliminated. This is a scary reality of today’s business environment. When the credit department stays in sync with the company’s overall longer-term goals, this can help the department continue to exist. Of course, job security is never a given these days, but a department that runs efficiently and productively usually has a positive impact on the company’s bottom line. The key for any department is to be a contributor to the bottom line, not a bottom line suck.
When a credit department hires collection agencies to assist with debt collections, the credit department’s strategic plan should include goals directly tied to the performance of the collection agency. The collection agency goals should be in sync with the company’s overall goals as well. For example, if the company plans to increase its customer base, the credit department’s strategic plan should determine what role the collection agency will play in the handling of the additional workload generated by the new customers. Collection agencies can provide a great deal of support to a credit department, especially during growth spurts. Building this into a strategic plan can help maintain efficiency and productivity, and hopefully add to the all-important bottom line.
The second and third articles will look at the specifics of developing the strategic plan – assessing the present, looking to the future, and setting action steps to get from here to there. Click here to go to the second article Collection Agencies And Strategic Plans – 2 Of 3.
The Kaplan Group is a boutique collection agency specializing in large (over $10,000) debt collections due from businesses. Founded in 1991, the company has a stellar reputation (A+ rating with the Better Business Bureau) and is recognized as one of the leading collection agencies for results on large and complex matters.