A Closer Look at Outstanding Accounts Receivable at Physio-Control

A Closer Look at Outstanding Accounts Receivable at Physio-Control
27
Mar

By Ben Cox, Account Executive

 

It’s true that lower balance accounts receive less attention. Let’s face it, do you want go after one $10,000 account or twenty $500 accounts that are overdue? As a result, these lower balance accounts often don’t receive personal phone follow up until after 90 days, or longer. I think it’s indicative of the ongoing problem that we’re constantly asked to do more with less, and so focus on the bigger fish, not the school of smaller ones, even though the net result in collections may be the same.

Recently, I’ve seen that trend reverse itself with a client in the medical device industry, at Physio-Control. Their high DSO on smaller accounts was all about head count not being able to keep up with sales volume. For this organization, aggressive sales resulted in tremendous growth in the actual number of accounts. Hiring temporary employees to manage collections required background checks, orientation, insurance, and basic training to internal systems and it also would reduce the organization’s profitability, overall.

So, their Senior Finance Manager, Will Young, gave us a call.

“With a portfolio of more than 4,000 accounts, it can be difficult to touch some of our lessor balances,” said Young, Senior Finance Manager for Credit and Collections. Most of these overdue accounts were absolutely collect-able, they just lagged due to lack of person-power to follow up. The evidence showed itself in the collections results once we started our follow-up.

“The collections rate has been truly remarkable,” notes Young. “We estimate the success rate has been over 80% involving our small account balances.”

Over time, we’ve helped the organization reduce outstanding receivables and improve cash flow on accounts ranging from $150 to just shy of $1000. It made sense to the client. Collectability lowers with every day an account ages. What equals a dollar sold, originally, becomes $.73 after 90 days and .$50 after six months.

We’ve also brought down those days outstanding from 90+ DSO to in some cases just under 60 days. Our collections staff has been doing this for years; they hit the ground running, making polite personal follow-up, with a commitment to ensure customer relationships remain positive. All in, so far, we’ve collected about $215,000 for Physio-Control, and counting, instead of having to write it off as a loss. And, moreover, we accomplished this while stabilizing their head count cost, ultimately lowering the cost of A/R collection. Looking over the collections report, it was a reminder to me the value of holding the line on adding collections staff by simply giving us a call.

In the past four months, NACM Business Credit Services has collected more than $1,200,000 for our customers with an average 64% recovery rate. We can help you clear some of that those accounts that have been looming large. Let us help you do more without adding overhead.

Ben Cox has been with NACM Business Credit Services since 2015. He joined the association after a tour of duty with Dun & Bradstreet and multiple medical device and software companies. If you need someone to help you create fresh solutions to your credit department challenges, Ben is your man.