In previous editions of AR Gone Wrong, I introduced and coined the term “Collection Loops.” A Collection Loop is what happens when a company outsources a portion of their “straightforward and simple” collections to another firm. The company provides limited information that basically includes the amount of money to collect, when it was due, who to collect it from and systems that are designed to assure that the debtors are Dunned efficiently. Part of this efficient collection process is to assure that no one falls through the cracks. They receive a call, letter or email every couple of days until the pay.
In the two previous real-life examples of AR Management gone badly, the Collection Loops were easily broken via one fax to the loop creator’s CEO.
