Copyright Commercial Collection Agency Section Commercial Law League of America
Cash flow is the engine that drives businesses large and small. Delinquent accounts are the brakes that bring companies to a screeching halt. The start of a recessionary economic environment in early 2001 and the impact on business from the attack on the World Trade Center on September 11 have conspired to reduce the collectability of commercial trade receivables during 2001. The recently completed March 2002 survey of members of the Commercial Collection Agency Association of the Commercial Law League of America shows a decline in the collectability of trade receivables across the board when survey results are compared between the years 2000 and 2001. For example, the collectability of accounts ninety days delinquent since due date declined by 4.8%, while those delinquent one year declined by 8.8%.
The above bar chart compares the collectability figures for 2000 and 2001. The survey clearly shows that the probability of collecting a delinquent account drops dramatically with the length of delinquency. For example, after three months, the probability of collecting delinquent accounts drops to 69.6%. After six months, collectability drops to 52.1%. And after one year, the probability of ever collecting a delinquent account drops to 22.8%.
The results of this survey clearly demonstrate the critical importance of taking positive action when an account receivable ages past its due date. Mr. Emil Hartleb, Executive Director of the Commercial Collection Agency Association noted, "Today's competitive economy requires that companies maintain a healthy cash flow with the ability to adapt to constantly changing market conditions. This is true whether you are in the printing industry or a company in Silicon Valley. Delinquent accounts, if they are permitted to age, can wreak havoc on a company's liquidity, as well as, tie up management and staff time that could be put to far better use. Companies must take a hard line on past due receivables, and turn to professional help when their internal efforts have not proved successful."
The survey polled the 111 members of the Commercial Collection Agency Association, who in aggregate handle about 80% of claims placed with professional commercial collection agencies in the United States. In 2001, the member agencies of the CCAA handled almost $12.0 billion in commercial claims.
The Commercial Collection
Agency Association was established as a separate section of the Commercial
Law League of America in 1972. The CCAA is dedicated to elevating the
standards of the commercial collection industry through the establishment
of operational standards, a code of ethics, member and public education
and legislative initiatives.
For more information about the Section, please contact Mr. Emil Hartleb, Executive Director, at 973/239-0721.
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