When I was a consultant, it was always difficult for me to understand how or why a credit department would not have specific goals and objectives for every one of its collectors. I think that setting the bar for collectors is an essential part of a managing the department and a great way to increase cash inflows. Setting the bar for collectors is not the same thing as harnessing them to a plow. It does not mean they need to turn rabid when a customer tells them they cannot clear a past due balance.
I think of setting the bar as involving things like this: Determining how many outbound collection calls should be made in the average week. Setting a limit of x percent of total accounts receivable in the oldest aging bucket. Determining the frequency of calls to delinquent accounts, and setting targets in terms of the percent past due in each of the aging buckets.
Even when collection goals did exist, I often found that the bar was set far too low. In one memorable instance, the collection goals of each of the collectors combined were lower than the collection goal established for the credit and collectione department. Specifically, the department’s goal was to have total A/R at > 90% current but none of the collectors’ individual goals were higher than 85% current!
Most of us know about S.M.A.R.T. goals. The A stands for achievable. My opinion is that an achievable goal should be potentially achievable, not
readily achievable [or worse] easily and regularly achievable. One last comment: If one or all of your collectors achieved their collection goals last quarter and/or last year, I think time right now to raise the bar.
That is my opinion. What’s yours?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.