Report: Commercial Collections Industry Is “Sound”

Dollars assigned rise, placements fall in H1 2007
The current slowdown in the U.S. economy is both a help and a hindrance to the commercial collections industry, according to an industry outlook study produced by accounts receivable management provider Euler Hermes UMA.

According to the recently published U.S. Commercial Collections Industry Outlook, the tightening of the U.S. economy, and specifically the challenges seen in certain industry sectors, has brought more placements to the commercial collections industry. "The U.S. credit granting community is a risk oriented one, and where there is credit extended, there will ultimately be collection problems; no commercial enterprise is exempt," said Michael T. Puckett, President of Euler Hermes UMA and author of the study. "As U.S. companies expand their receivable portfolios, their collections problems and needs grow proportionately." Consequently, though, he said the slowing economy this year has made it more difficult to collect on placed accounts.

The U.S. Commercial Collections Industry Outlook examines the significant changes seen within the industry, including the addition of new industry players, the effects of new technology and the globalization of the business. In the report, Puckett — who has nearly 40 years of experience in the commercial collection arena — also looks at the present and future conditions within the industry.

The need for commercial collections is rising as the nation’s economy continues to slow. In the latest National Association of Credit Management Credit Manager’s Index survey, the nation’s manufacturing sector saw sharp declines in the "accounts placed for collections" and "dollar amounts beyond terms" components, suggesting cash flow difficulties. "Indeed, respondents in the survey reported that customers are disputing more payments and slowing payments, while others are taking longer terms without approval," said Euler Hermes ACI Chief Economist Daniel C. North, who provides commentary and analysis for the survey. North said the housing market continues to be a major drag on businesses, "and there appears to be little relief in sight as home-builders continue to report bleak conditions," he said.

No matter the economic conditions, though, Puckett said engaging the services of a commercial collection company will safeguard the assets of a company without taxing its existing internal credit management infrastructure. "Effective collection of receivables is crucial to condensing the revenue cycle and creating working capital and additional borrowing capacity, hence adding to the value of a company."

Source: Euler Hermes ACI

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