case study about credit and collection

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Case Study: Optimising Credit and Collections Management at Edward Don

It is standard management practice to evaluate performance in key business areas against industry norms. At Edward Don and Company, we became quite concerned when our internal performance indicators revealed that we were flagging 66.2% of our active accounts as carrying a high credit risk. Subjectively, this number stood out as a very high scoring – and therefore very suspect – result. In practice, the high level of customer credit concerns were throwing up numerous road blocks in our core business, the distribution of food service equipment and supplies in the US.  

Reacting to what appeared to be a very poor customer base credit scenario resulted directly in several impacts on our operations:  

• What in fact turned out to be an excessive number of orders were being placed on ‘credit hold’. This reaction had a negative effect of requiring our collectors to spend an excessive amount of time on reviewing and releasing orders, and therefore resulted in less time for value-added activities. They were primarily spending time on the phone contacting customers for payment. About 98% of held orders had to be released manually, resulting in execution delays and increased processing costs. 
• The knock-on problems included growing frustration among our sales force, and an increasing risk that our customers were not optimising their sales potential.  

Clearly, it would have been imprudent simply to loosen our credit standards arbitrarily, which would run the risk of increasing payment delays and counterparty failures because of inadequate credit analysis. We needed to quickly find out which of our customers truly presented high levels of credit risk, so that we could then more confidently accelerate order processing for all the others. If we could achieve this, the vicious circle would swiftly transform into a virtuous circle, with accelerated payment performance, better satisfied customers, lower credit risk exposure, more efficient operations and enhanced business development opportunities for our sales force.  

The resolution of this issue was clearly a very urgent corporate priority, as it was significantly impacting our core business operations.   

The Base Situation

Edward Don and Company runs a decentralised 41 person set of credit and collections teams, distributed around our regional offices in Florida, New Jersey and Texas, and at the corporate headquarters in Illinois, US. The team includes 35 credit collectors/analysts, each of whom is responsible for about 1,200 accounts.  There are about 35,000 active accounts, growing at the rate of 150-200 new accounts per week. Our core business pattern consists of a high volume of relatively low value transactions.  

Our original approach to credit analysis involved the construction of generic scores, primarily based on information supplied by specialist credit bureaux. These scores were used to evaluate the creditworthiness of new accounts, so that credit lines and payment terms could be assigned to each account. They were also used to monitor the existing accounts, supplemented with the team’s analysis of published, financial reports plus some internally originated account performance data. The team also used the analysis to construct collection strategies where these were needed, in reaction to seriously late invoice payment performances. 

Generally, this describes a pretty standard methodology that is widely used in the credit and collection business, but it did not seem to be generating sufficiently accurate results for us. Therefore, the operation was becoming afflicted with bottlenecks, and was increasingly stressed, as I have described above. 

The team felt that the poor predictive quality we were experiencing with respect to accounts’ changing credit condition probably resulted primarily from a lack of accurate and timely input data. The underlying strategy then in place was, reasonably enough, quite conservative; but in practice, it was generally tending to assign far too many customers to an inappropriately high risk status, with the consequences I have outlined. One of the causes of this unsatisfactory situation was the basing of the analysis of some accounts on the ‘ship-to’ location, rather than focusing on the actual legal entity that truly reflected the risk. This approach will almost always lead to an underestimation of an account’s credit status.  

Paradoxically, other flaws in the analytical methodology were in some cases resulting in the underestimation of the true risk that was being carried by some other accounts. 

So we were operating in an unsatisfactory environment in terms of the timeliness and accuracy of our credit management process, and were therefore experiencing growing problem issues in collections, in risk exposure, and in related fields. We were also becoming increasingly sure that we were by no means using our professional credit and collections teams at anywhere near their full potential. Something had to be done.   

Initial Solution Identification and Validation

Our first analysis of the problem, and of potential solutions, strongly suggested that we could obtain much more valid and valuable results by using a statistical modelling process to support our credit and collections operation.  

We decided to invite SunGard to perform an initial analysis, and this they did in a complimentary validation exercise using a proven statistical model solution called AvantGard Predictive Metrics. Essentially, this model quantitatively predicts the chance that a given customer’s current good payments performance will deteriorate at some point over a time horizon of the next six months.  

In outline, the methodology for the validation was based on the statistical behavioural analysis of our historical accounts receivable (A/R) data. The end result showed the probability of each account becoming delinquent, expressed for example as the amount of cash at risk, which is a strikingly practical and vivid indicator of risk. Accordingly, we could see ahead into areas of potential future risk, by being able to evaluate the bottom line impact. 

As the predictions were derived based on the analysis of real data that we had supplied, the team felt the validation was based on an objective process that properly reflected our own ‘typical’ commercial operations.  

Among the innovations introduced into the analysis were proven variables such as accounts payment (A/R) histories, the impact of seasonal factors, the impact of changing economic conditions, and the trend performance of actual orders. Our understanding was that the introduction of such specific information would be effective and powerful factors in refining the analytical process. 

The validation exercise operated on a substantial volume of Edward Don and Company’s historical business data, representing 18 months’ history of actual receivables collection. The analysis reporting which we received was presented in clearly intelligible form, so that our teams could see which accounts out of our entire set of client accounts were the ones in reality, most likely to deteriorate in creditworthiness, and to potentially become delinquent.  

The key to our internal validation of SunGard’s model was the comparison of the forecasted results with the actual delinquencies that Edward Don and Company in fact experienced. The results showed a very high level of forecast accuracy and actual result correlation; so we were quite effectively satisfied that the AvantGard Predictive Metrics model had the proven potential to add real value to our credit and collection operations.  

Solution deployment   

Interestingly and most helpfully, the prospective solution validation exercise additionally provided a reliable template for rolling out the live solution in our country-wide operation, once we have received positive feedback from the initial stages of the project.  

The implementation team that was eventually put in place combined Edward Don and Company executives alongside SunGard’s AvantGard Predictive Metrics product specialists. 

The key operating result achieved upon launch was that the effective statistical analysis of each month of our data, required just one business day’s effort from now on. After this our teams were working with up-to-date, accurate and dependable data in support of their core professional duties.  

This substantial change led directly to several clearly quantifiable improvements being achieved in our credit analysis and management, order management and collection processes. And all of these advances had direct and positive impact on our core commercial activities.   

Tangible Benefits Achieved   

I have noted earlier that our prior credit and collection management processes had flagged 66.2% of our customer accounts to be high risk; and this apparent finding led directly to high volumes of orders being unnecessarily held up in our order processing workflow.  

In contrast, our new tools enable 80% of these orders to bypass the credit review system for immediate processing, immediately enhancing our cash flow performance, and improving our customers’ opinion of our order execution proficiency.  Most dramatically, today only 14.1% of our entire A/R portfolio is now classified to be high risk. 

Another immediate benefit achieved was that our credit collectors / analysts are now able to focus their professional attention where it is really needed, namely on those accounts which have been properly identified to truly merit high risk status. As our teams’ confidence in the quality of the new statistical analysis grew with increasing practical experience, the credit collectors / analysts found that they were able to dedicate much more of their time and energy onto those account situations in which they could make a real, measurable impact on improving our collection performance. 

It is also interesting to relate that the process is now more highly automated because of our confidence in the accuracy of the underlying analytical model. This means that many customer orders now flow through the system without requiring any kind of analyst intervention, and so are not impeded, as they used to be, by being held for research and resolution. This operational improvement additionally reduces our processing costs, enhances customer satisfaction levels, and liberates our sales force to concentrate on business development.  

A further, different type of benefit we have achieved is that, having identified the most high risk customers, we can now simply and accurately cut the relevant credit lines; and we can, conversely, increase lines to the more creditworthy customers identified in our new analytical environment.   

In practice, we have experienced a 25% increase in the volume of outgoing phone calls initiated by our credit and collections teams, reflecting their new capabilities to be more proactive in their account management duties, and in other priority operations.  

We can now set account management strategies that are directly linked to realistic risk assessment processes, both for the initial assignment of appropriate credit lines to new customers, and also for prioritising collection processes. The relevant information for each account is analysed and reported using a simple six-point risk grading system, and we can initiate research and report on any account, at any time. The reporting can also quantify the risk in cash terms, to broaden the value of the analysis for treasuries and other departmental units. 

Today’s still challenging economic and financial conditions mean that we cannot afford to be in any way complacent in our outlook toward credit and collection.  Every year, our team works with SunGard’s AvantGard team to revalidate and recalibrate the statistical models that support our operation, so that we can operate most effectively as external conditions change.  

Conclusions   

We are now confident that the Edward Don and Company’s credit and collections management process has been substantially optimised, through the deployment of the SunGard AvantGard Predictive Metrics statistical modelling solution. 

Perhaps the most telling current metric is the improvement in our days sales outstanding (DSO) performance by the highly significant amount of 5.3 days.  Where our former focus was concentrated on chasing aging receivables and on analysing customers’ credit terms, we now have the ability to predict and manage account credit deterioration more precisely and reliably. We can – and do – dedicate our professional resources to those accounts that really need it.  The benefits of these changes are reflected beyond our improved collection performance to more efficient account management, more satisfied customers, and a more productive sales team.  

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Improving average net yield per customer by 101% through digital collections

The challenge: improving collections performance while ensuring customer satisfaction.

An American bank specializing in credit cards, auto loans, banking, and savings accounts, with operations primarily in the US was looking to upgrade their collections practice for improving sales collection performance and manage new accounts coming into collections while ensuring a good customer experience.

Recognizing the limitations of a traditional collections process, the bank sought to modernize its approach to improve performance and adopt a more consumer-friendly posture through omnichannel engagement by enabling voice, email, webchat, text messaging, social media and whitemail. A scalable solution was needed that could quickly ramp up to address new segments.

Firstsource was required to ensure that all customer contact material, including scripts, chatbots and self-serve models were 100% compliant with FDCRA and related regulations.

The solution: A ‘Digital First’ strategy, expanding lines of communication with customers

Given the requirement for a faster time-to-market, Firstsource transformed the traditional collections operation into a digital white-label model leveraging its Digital Debt Collections offerings including:

• Firstsource’s Digitally Empowered Customer Experience (DECX) = supported by our on-shore and off-shore collections teams ensuring 24/7/365 availability
• An omnichannel communications platform enabling consumers to conveniently engage with intuitive self-serve capabilities
• Intelligent Automation tools for associates to offer personalized solutions based on customer profile insights
• Real-time metrics to provide quality control feedback for 100% consumer engagements
• Proprietary analytics methodology to create  a model that predicts propensity to pay and customer priorities

The result: Delivering superlative customer experience while improving recoveries

The client achieved a 101% improvement in average net yield per customer using a digital approach, from $69 to $139. Annually, Firstsource generates $65M in collections for the client. Currently. more than 60% of the clients’ accounts come through the digital stream. The new platform achieved the highest CSAT and NPS scores in the network: CSAT >91 % consistently delivered. The financial institution’s employees now have more career opportunities and potential for portfolio growth. The platform has supported employee growth from 40 FTEs to 175 FTEs in 18 months. The platform’s ability to provide real-time metrics facilitates an incentive compensation program for employees

In the near future, we are building a Machine Learning module to further improve ROI and supercharge the customer experience.

Business impact

Average net yield per customer up from $69

CSAT consistently delivered

Weeks for modernizing operations

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The analytics-enabled collections model

The global credit environment absorbed the effects of the financial crisis at varying speeds from market to market. In some places, loss rates have remained relatively high since 2008–09; in others, the past decade has been one of steady improvement, with tapering losses that have only recently begun to climb again. In the expanding markets, lenders increased their risk exposure, issuing new products designed around easier underwriting guidelines. Little attention was paid to maintaining or improving collections capabilities. As debt loads rise, however, institutions in these markets are beginning to rebuild collections staff and skills that eroded in the previous period. Meanwhile, in the more stressed markets, the need for more efficient and effective collections operations is likewise becoming a priority.

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The need to renew collections operations provides lenders with an ideal occasion to build in new technologies and approaches that were unavailable when the financial crisis hit. The most important advances in collections are being enabled by advanced analytics and machine learning. These powerful digital innovations are transforming collections operations, helping to improve performance at a lower cost. Better criteria for customer segmentation and more effective contact strategies are being developed. Individual collector performance is being improved with better credit-management information and other tools. Contact can be managed through an array of channels, some allowing customers a greater sense of control over their finances. Loss-forecasting strategies can also be made more accurate and predelinquency outreach made more effective with enhanced financial tools and mobile apps.

Some of the most significant advances brought about by advanced analytics and machine learning are in customer segmentation, which is becoming much more sophisticated and productive. Better segmentation—including innovative behavioral segmentation, discussed in detail in an accompanying article—is providing the basis for more effective collections processes and strategy. The improvements affect the complete collections agenda, beginning with the prevention and management of bad debt and extending through to internal and external account resolution.

A next-generation collections model

In traditional collections processes, banks segregate customers into a few simple risk categories, based either on delinquency buckets or on simple analytics, and assign customer-service teams accordingly. Low-risk customers are usually given to newer collections agents based on availability; the agents follow standardized scripts without being asked to evaluate customer behavior. Agents with moderate experience, training, and skills are assigned, again based on availability, to medium-risk customers. These agents also follow a standardized script but are trained to assess customer behavior based on ability and willingness to pay. High-risk customers are assigned to the most skilled agents, who own their accounts and use less standardized approaches to develop assessments of customer behavior. Contact strategies and treatment offerings are fairly varied across the risk categories.

By using advanced analytics and applying machine-learning algorithms, banks can move to a deeper, more nuanced understanding of their at-risk customers. With this more complex picture, customers can be classified into microsegments and more targeted—and effective—interventions can be designed for them (Exhibit 1).

Using analytics in the new model

Analytics-based customer segmentation is at the center of the next-generation collections model. The transformed collections model will allow lenders to move away from decision making based on static classifications, whether these are standard delinquency stages or simple risk scores. Early identification of self-cure customers will be one benefit. Another will be an approach based on value at risk, rather than blanket decisions based on standardized criteria. The aspiration is to have every customer as a “segment of one” with customized treatments.

Leaders taking the analytics-based actions that define the new model have already begun to realize gains in efficiency and effectiveness. One European bank automated 90 percent of communications with clients by developing two advanced-analytics models using machine-learning algorithms. A binary model identifies self-curers and non-self-curers, and a multiclass model recommends collections strategies for the non-self-curers, including soft measures, restructuring, or workouts. The models use around 800 variables, including client demographics and information on overdrafts, client transactions, contracts, and collaterals. The bank has realized more than 30 percent in savings with no loss in operational performance.

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Another European bank set out to develop a top-notch recovery process using advanced analytics. The goals were to minimize the number of clients falling 90 or more days’ past due while maximizing the economic impact of exits, focusing on retail and small-and-medium enterprise portfolios. As the bank gained a deeper understanding of its nonperforming loans, it was able immediately to address certain borrowers (such as recurring defaulting clients) with effective initiatives. Other groups of clients were identified, and exit strategies based on economic value were developed for each group. The results are compelling. The bank reduced its 90-day-or-more portfolio by more than €100 million, with €50 million in fewer past-due entries and the remainder in exit acceleration. Moreover, a reduction of 10 percent in past-due volumes was achieved across the board, worth around €300 million less in past-due exposure.

A leading North American bank has rolled out a number of machine-learning models that improve the estimation of customer risk, identifying customers with a high propensity to self-cure as well as those suitable for early offers. These models have so far enabled the bank to save $25 million on a $1 billion portfolio.

Most banks can achieve results of this magnitude by introducing an analytics-based solution quickly and then making needed improvements as they go. Value can be gained in almost all of the key areas in the collections environment.

• Early self-cure identification. Some banks use rudimentary heuristics (rules of thumb) or simple models to identify self-cure customers, while others have adopted simple self-cure models with limited variables. The new self-cure model based on machine learning and big data can save collectors a lot of time. By using many variables to better identify self-cure accounts, banks can increase collector capacity by 5 to 10 percent, allowing agents to be reassigned to more complex collections cases.
• Value-at-risk assessment. While many banks use time in delinquency as the primary measure of default risk, some lenders are taking a more sophisticated approach, building a risk model to determine value at risk. Many of these are simple trees and logistic regressions, however, with limited data. Leaders are moving to a future state in which models project conditional probability rather than assign customers single risk scores. The conditional score is dependent on a range of tailored approaches to customer contact and engagement: every borrower has several scores depending on the contact strategy and offer. Lenders would then use the strategy and offer that optimizes recoveries. The approach better calibrates the intensity of contact with each account, thus optimizing resources. A next-generation value-at-risk assessment can further reduce charge-offs by 5 to 15 percent depending on maturity of current operations, analytics, and availability of data.
• Cure assessment versus pre-charge-off offers. At most banks, agents determine whether a customer will cure or will need an offer of some sort; some banks have heuristic rules for agents to follow. The new approach is to use models that ascertain a customer’s ability and willingness to pay and gauge whether the better path is a cure or an offer. Banks can resegment delinquent accounts to improve their decisions to offer early settlement, an approach that increases the uptake of offers while reducing charge-offs by 10 to 20 percent.
• Optimizing pre-charge-off offers. Banks are currently using rules or simple analytics to create offers for customers, often without determining the likelihood that they will accept. Models will predict the best offer, optimized for the needs of the bank and the customer. Banks can change the prompt, adjusting loan characteristics and offerings to those most likely to reduce charge-offs, including re-amortizing the term or interest rate, consolidating loans, or settling. Making the right offer early, before accounts enter late-stage delinquency, can improve acceptance rates.
• Post-charge-off decision. Most banks use simple models or heuristics to determine which agencies to send accounts to, and at what price. To refine these decisions, models will determine the best agency for each account and tailor prices accordingly. The model will also determine the optimal pricing segmentation for third-party agencies and identify the accounts to retain in-house longer (based on products retained with the bank, for example). The strategic use of third parties can help with accounts that cannot be cured internally.

Integrated analytics models

Lenders at the forefront of the analytics transformation are assembling masses of data from many kinds of sources and developing different models to serve collections goals. The data sources can include customer demographics, collections and account activity, and risk ratings. The most sophisticated lenders are creating “synthetic” variables from the raw data to further enrich their data. Machine learning helps identify markers for high-risk accounts from such variables as cash-flow status, ownership of banking products, collections history, and banking and investment balances. By using so many inputs from many different systems, lenders can dramatically improve model accuracy, lower charge-off losses, and increase recovered amounts. Two separate institutions recently adopted similar approaches using more than 100 variables to support numerous machine-learning models. These issuers used machine learning to identify the optimal treatment and contact strategy for each delinquent account; deployed the solution inside the existing collections workflow environment; and trained collectors to use the system and collect additional data to improve model performance. The initiatives were up and running in about four months (Exhibit 2).

Contact strategies and treatment approaches

Institutions adopting the most analytics-forward approaches have been intensifying the development of new treatment and contact strategies, expanding the limits of digital capabilities. By applying advanced analytics and machine learning, banks can identify the most promising contact channels, while also developing digital channels to define innovative and regulatory-compliant contact strategies. The same digital channels can be used to build awareness of payment options.

• Websites can display messages and repayment options as soon as customers log in, increasing awareness and providing opportunities for early delinquency reduction.
• Messenger and chat. Where legally permissible, collectors can contact customers and negotiate payment options with chat functionality and free messenger applications (such as WhatsApp).
• Mobile apps. Build collections functionality into the mobile app, reminding customers in early delinquency stages to pay and offering payment options.
• Virtual agent. Create capacity by developing virtual agent functionality to call customers in early delinquency stages.
• Voice response unit. Enhance current voice-response capability, offering basic repayment options when customers call, which frees collector capacity.

Most banks use heuristics to establish the best times to call. Usually, however, agents are inadequately supported on questions of which channel to use, when to use it, and what the message should be. Advanced models can project a full channel strategy, including channel usage, timing, and messaging. Banks will be able to control contact down to the hour and minute, as well as the sequence of communications—including voice, text, email, letter, and interactive voice message. The approach is developed that maximizes the right-party contact rate (RPC) and influences customer behavior to prioritize payment. Such optimal contact sequencing can increase success in early stages of delinquency.

The analytics focus on the front line

Leading companies in many sectors—digital giants, healthcare providers, retailers, and manufacturers—are using data and analytics to develop a workforce optimized to business goals. Analytics is now the source of improved performance in realizing talent strategies as well as a means for linking talent strategy to business needs. Presently, recruiting and retention are often based on legacy processes, including résumé screening and interviews; retention is based solely on performance. Analytics can improve hiring, finding agents with affinities to the most valuable at-risk segments, as well as help identify collectors at risk of leaving. Companies are using machine-learning algorithms to screen résumés and to determine the value of external hiring compared with internal promotion. One global digital company used analytics to create a checklist that boosted onboarding speed by 15 percent. The algorithms, it should be stressed, are not replacing human judgment but are rather providing a deeper fact base for the exercise of informed judgment.

Companies are also using algorithms to uncover the bottom-line impact of employee engagement and to drive deeper engagement across the organization. In collections, where retention of talent is a recurring issue, people analytics can be used to find the drivers of performance, including personality profiles and risk factors for low performance and engagement. By identifying individuals most at risk of leaving, for example, banks can take responsive measures to optimize their talent pool for sustained performance improvement.

The seven pillars of (collections) wisdom

Machine learning and nontraditional data have become the new frontier in collections-decision support. Audio analytics, for example, is now an important tool for understanding frontline effectiveness. By allowing algorithms to work through thousands of conversations, banks can discover the most productive and engaging approaches. With hypotheses informed by insights from the field of behavioral science, banks are also using machine learning to diagnose and neutralize the biases that affect collector and customer decision making. At the same time, the machine-learning approach is enabling automation of larger classes of decisions. By giving agents more prescriptive decision support in certain situations, including a wider range of set script elements and narrower parameters for negotiations, banks can free capacity and redirect resources toward the most valuable accounts. In this vein, one card issuer achieved dramatic improvements in the rate of promises kept in their high-risk segment by using an approach enabled by data and analytics to script elements, including behavioral insights (Exhibit 3).

Behavioral pairing and agent coaching

Many banks do not apply agent–customer pairing uniformly or deliberately. When it is applied, high-risk customers are usually given to experienced, high-performing collectors, while low-risk customers are assigned to new collectors. Analytics-aided pairing helps match collectors and customers who have similar personal profiles. By smarter pairing—matching delinquent clients with the agent expected to be most effective—outcomes can be improved and call times reduced. As for coaching, this has often occurred in training sessions, huddles, and call monitoring by managers. Analytics-aided coaching permits real-time feedback and analysis in live phone calls.

Breaking through artificial barriers to transformation

Most banks understand that analytics and digital automation will transform their collections operations. Some have been reluctant to get started, however, in light of following persisting myths about the new technologies:

• “Sophisticated data infrastructure is a prerequisite.” While this is an advantage, it can be developed over time. The truth is that banks can build value-enhancing collections models with available data. As the data are improved, the models can be updated accordingly.
• “Both the collections front line and the digital infrastructure need to be in place before analytics models can be implemented.” Actually, models can be implemented using legacy infrastructure, and the value they generate can be used to invest in the needed infrastructure improvements.
• “The development and implementation of models take a long time.” Banks can get started using agile model development with minimum viable products subject to continuous improvement. Without rapid iteration and deployment of models, value is left unrealized.
• “Given compliance and regulatory issues, models are too opaque to use.” Banks can select among a range of modeling techniques with different levels of transparency. They can balance demands for transparency and performance by choosing the most appropriate algorithms.
• “Success depends on nontraditional data.” For most collections applications, banks’ internal data can provide the majority of the gains from advanced analytics. Banks can begin by utilizing all internal data and supplement with external data subsequently as needed.
• “Regulations and compliance negate many of the benefits of advanced analytics and machine learning.” A number of banks in highly regulated jurisdictions have already successfully deployed machine learning. Indeed, machine learning can improve compliance by better matching the right treatment with the right customer and avoiding biases.

None of these myths should prevent banks from beginning the analytics-enabled transformation of their collections operations. There is no perfect way to start a transformation—some of the implementation might even be messy at first. The essentials of the analytics transformation in collections are clear, however. First, set a long-term vision, but also a path toward it that generates value continuously. Second, work in an agile manner, with teams from all dimensions of the transformation. Focus on implementing working models from day one, avoiding an overly complex academic approach. Use synthetic variables to enhance model performance, and continuously experiment with strategies to generate additional data for the next generation of models.

The next-generation collections environment will be built around advanced analytics and machine learning. These approaches will help lending institutions meet the new delinquency challenges that market analysts predict are on the horizon. The transformation of collections has in fact already begun, as leading institutions assemble the data and develop algorithms to attain improvements in their existing collections context within a few months’ time. These leaders are showing the way by applying the new approaches and making improvements as they go. And they are already generating bottom-line results.

Ignacio Crespo is a partner in McKinsey’s Madrid office , and Arvind Govindarajan is a partner in the Boston office .

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Understanding Credit and Collections Benchmarks and Best Practices

This collection features Credit and Collections data and practices from APQC's Open Standards Benchmarking® surveys for Accounts Receivable  and Customer Credit and Invoicing . It includes interactive dashboards to track real-time performance against the KPIs, articles examining select KPIs, best-practices, and industry benchmarks and practices. 

Included in this Collection

Interactive credit tune-up diagnostic, interactive collections tune-up diagnostic, customer invoicing and credit key benchmarks, accounts receivable industry spotlights, key benchmarks and drivers of credit and collections performance (whitepaper), total cost to manage and process collections, percentage of invoices billed to customers that have credit terms, days sales outstanding, uncollectable balances as a percentage of revenue, total uncollectable balances as a percentage of revenue, when you should write off rather than continue trying to collect, decrease wait times for credit approval and improve customer relations, how a large diagnostics company improved their credit and collections processes, building a best-in-class finance function: cargill inc., transforming credit-to-cash at cargill, benchmarking and improving your credit and collections processes.

Credit Control for Accounts Receivable Management: A Case Study of a Pharmaceutical Company

• First Online: 29 May 2022

Cite this chapter

• Abdulla Abdulmajid Alkhaja 4 ,
• Ahmad Obaid Almheiri 4 ,
• Obaid Meshal Almansoori 4 ,
• Omar Abdulaziz Alabdulla 4 ,
• Saeed Ali Almarri 4 ,
• Randa Elchaar 4 &
• Rihab Grassa 4  

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1 Citations

Account receivables management is a fundamental aspect in evaluating a firm’s efficiency in regards with cash flow and credit turnovers. The purpose of this paper is to assess the credit control and receivable management efficiency for one of the largest pharmaceutical company operating in the world. Our paper findings show that pharma companies should implement stringent credit control measures that can help in improving their cash flow. As well as, company in this industry should form strategic alliances that help in sharing credit information and implementing credit control measures.

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Abdulla Abdulmajid Alkhaja, Ahmad Obaid Almheiri, Obaid Meshal Almansoori, Omar Abdulaziz Alabdulla, Saeed Ali Almarri, Randa Elchaar & Rihab Grassa

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Alkhaja, A.A. et al. (2022). Credit Control for Accounts Receivable Management: A Case Study of a Pharmaceutical Company. In: Echchabi, A., Grassa, R., Sibanda, W. (eds) Contemporary Research in Accounting and Finance. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-16-8267-4_5

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• Introduction to Credit and Collections management

Introduction

Debts that are not paid on time, organizations and individuals that become insolvent, judgments that are not fulfilled and are not enforced, standing orders and checks that bounce – all of these are a nightmare that could materialize at any moment for hundreds of thousands of organizations and citizens across the world.

The importance of Credit and Collections risk management

Risk management in an organization is a process whose purpose is to identify the existing risks, evaluate them, examine the existing controls, and finally choose a strategy for dealing with or covering each risk – with the aim of limiting or reducing it.

Let’s take the risk of fire in the business as an example . A risk manager’s initial responsibility involves evaluating a fire’s potential impact on the business. This entails a thorough assessment of current safety measures, including verifying the presence and standards compliance of smoke detectors, reviewing and updating fire emergency procedures for employees (such as evacuation routes and safety signage), and inspecting fire suppression tools (like fire extinguishers, hoses, and sprinkler systems). Following these preliminary steps, the risk manager, often with input from a fire safety expert, must decide on necessary enhancements to these measures and establish a schedule for regular review.

Subsequently, considering the residual risk after implementing all precautionary and protective strategies, the risk manager must assess the need for fire insurance that aligns with the evaluated risks. This includes selecting a deductible that reflects the business’s financial capacity, thus balancing the insurance costs with the level of risk retention that the business can afford.

This approach applies across all types of risks within an organization, ranging from disruptions in delivering products or services to customers, reputational damage, strategic vulnerabilities, and environmental harm.

Credit risk management is crucial to an organization’s overall risk management framework. Despite the varying maturity levels in risk management practices across organizations, particularly within small and medium-sized enterprises globally, the function of managing credit risk is commonly present, albeit under various terminologies like credit control, customer credit management, and similar designations.

At this juncture, we can provide a straightforward explanation of credit risk management and its value to the organization as follows:

Credit risk management within an organization addresses the uncertainty regarding a customer’s ability or intention to fulfil their financial obligations promptly and in full.

This discipline is a foundational economic and financial element that ensures the organization’s stability by influencing cash flow. It is integral to the company’s sales, production, and service provision cycle. Enhancements in managing credit and collections risks not only bolster cash flow and customer satisfaction but also lower collection expenses, thereby augmenting the organization’s profitability.

Exploring the realm of credit and collections, equipped with the comprehensive “toolbox” available to a credit and collections risk manager, offers a wider professional perspective than the traditional roles of a credit control manager or collections manager. This approach enhances the credit granting process by going beyond merely evaluating the collateral a customer offers. It also considers the customer’s industry sector, such as the textile industry, and assesses the broader market risks associated with the organization’s operational markets, whether they be domestic or international.

The credit risk manager is entrusted with addressing the risk of the entire client portfolio of the organization, just as a bank manager is entrusted with handling the risk of his client portfolio – using operational terms from the banking world (such as credit limit and excessing limits). The credit and collection risk manager can adopt control processes to examine the quality of the collection processes from the world of risk management while dealing with examining, planning and managing the operational risks inherent in them.

Organizations must prioritize credit risk management, collections processes, and accurate customer billing in today’s intricate and competitive landscape. This emphasis extends from the initial customer interaction with the product through the entirety of the marketing and sales journey to the final collection of payments. This underscores the necessity for effective cross-functional management encompassing all credit control, billing, and collections departments to ensure seamless operations and financial stability.

The purpose of this website

The purpose of this website is twofold: firstly, to educate and empower managers and staff to execute credit risk and collections tasks independently, fostering a collaborative spirit within the organization. Secondly, it aims to equip readers with the knowledge and tools necessary for identifying and forecasting financial challenges, thereby effectively managing credit and collection risks associated with their clientele. A significant focus is placed on maintaining healthy and respectful customer interactions, emphasizing the importance of customer relations and retention. This unique perspective underscores the website’s emphasis on enhancing the “customer experience” throughout the credit and collection processes.

We aim to enable readers to gauge the comprehensive risk landscape of their organization’s credit and collections framework, both in financial terms and as a segment of the sales cycle, and in comparison to peers within the same sector. We plan to introduce structured and systematic approaches to managing credit risk and collections, empowering readers to concentrate on their objectives and achieve desired outcomes.

To facilitate informed decision-making, we intend to provide a selection of key indicators alongside both global and local reports. This extensive array will offer a holistic and accurate view of the efficacy of their credit control and collections strategies, evaluated individually and against industry competitors.

It’s also vital to provide readers with tools to evaluate the alternative costs of managing credit and collection risks. Often, organizations expend considerable resources on collections due to a lack of awareness and effective strategies. We aim to present the various considerations informing the decision on whether collections should be conducted internally or outsourced to external entities, either partially or in full.

Furthermore, an overarching goal of this website is to establish a foundational framework for the study and professional development in the fields of credit management and collections. This initiative seeks to elevate the level of professionalism within these disciplines, aspiring towards the creation of academic pathways and degree programs dedicated to credit management and collections professions. We intend to contribute to professionalising roles within these systems, fostering a culture of academic pursuit and professional excellence in the field.

In the United States, recognized certifications for credit and collections professionals include programs offered by the National Association of Credit Management (NACM), such as the Certified Credit Executive (CCE), designed for credit professionals seeking to excel in their field. The CCE program involves completing core courses, an elective course, and a comprehensive exam​​.

Another notable certification is the Certified Professional Collector (CPC) and Certified Credit Professional (CCP) certifications offered by the Credit Management Association (CMA), in collaboration with the American Society of Credit & Collection Professionals. These certifications are aimed at individuals in credit and collection roles, providing comprehensive training to prepare them for these ever-changing fields​​.

The Chartered Institute of Credit Management (CICM) in the UK offers globally recognized qualifications for credit management and debt collection professionals. These Ofqual regulated qualifications are designed to develop members into standout credit professionals​​.

Additionally, the UK offers a range of finance certifications recognized internationally, such as the CISI Diploma in Investment Compliance from the Chartered Institute for Securities and Investment (CISI), which provides qualifications for a career in compliance, and the Associate Chartered Banker Diploma from the Chartered Banker Institute, enhancing the skills of those already working in banking​​.

These certifications are invaluable for professionals in the credit and collections field, offering a pathway to demonstrate expertise, advance career prospects, and maintain high standards within the industry.

The website’s uniqueness

Several key features highlight the website’s uniqueness:

• It provides tools for a comprehensive understanding of credit risk management and collections, focusing on intelligent process management rather than the processes themselves. This means it goes beyond the “how to collect” to “how to manage collections” strategically.
• The data and reports presented adhere to reliable and advanced international and local standards, ensuring readers can access cutting-edge information.
• The website is a foundational resource for learning about the professions within credit and collections. It addresses credit control from a theoretical and practical perspective. It offers effective and practical credit risk assessment and mitigation tools while maintaining sales levels according to organizational goals and work plans.
• Unlike other texts primarily focusing on managing late-paying customers, this website covers the entire credit and collection world, including managing timely-paying customers. It argues that collection efficiency cannot be measured without considering all customers and all collection costs, including those incurred from timely payments.
• “Customer experience” considerations are extensively discussed, emphasizing their importance in the overall organizational context and various processes. The goal is to implement a smart policy for retaining the organization’s customers.
• The website provides tools for examining the real costs associated with credit risk management and collections, offering suggestions for cost savings.
• A section is dedicated to managing collection centres at advanced standards, which is crucial for companies with a large number of customers (thousands and above).
• Comprehensive knowledge on working with lawyers is imparted, including considerations for legal action against customers, cost examination, lawyer selection and contract processes, and the overall efficiency of legal proceedings.
• It also tackles complex accounting issues, including legal and commercial aspects, such as provisions for doubtful debts and writing off bad debts. Additional relevant topics include basic knowledge and tools in selling credit risk, ethics in collections, customer relations, and the quality of credit and collection processes.

This summary encapsulates the website’s holistic approach to credit and collections management, emphasizing not just the technical aspects but also the strategic, ethical, and customer experience dimensions that are vital for professionals in the field.

Who is this website for?

The website is intended for a wide range of professionals involved in credit and collections within large, medium, and small organizations. The term “organization” in this context encompasses any entity that includes a credit and collection system. This includes institutional units such as companies, partnerships, and other legal entities like non-profits or government bodies engaged in credit and collections.

It is specifically written for the business players who value credit risk management and collection systems, as well as those seeking to improve and streamline these systems to reduce overall costs, foster proper public relations with customers, increase cash flow, and, consequently, profitability.

The target audience is broad, including senior management (CEOs, owners, executive management, and board members), finance personnel (CFOs, finance managers, accountants, and treasurers), employees of credit and collection departments, legal department staff handling customer cases, customer service, marketing, and sales managers. It also extends to any organization staff involved in collection processes (like drivers collecting payments upon delivery, warehouse representatives securing equipment receipt signatures, technicians collecting repair fees, etc.), accountants advising small and medium-sized organizations, lawyers engaged in collections, and organizational consultants.

The structure of the website

The website is designed to facilitate systematic learning about the management of credit risks and collections. It advocates for incorporating the “customer experience” as an integral part of credit and collection processes throughout its chapters. This concept, which will be defined in detail within the website, intuitively refers to the entire journey of a customer’s interaction with the organization’s credit and collection stages. This includes everything from the initial sale and payment for a product or service to ongoing interactions with the customer. The website’s structure, illustrated in Diagram 1, outlines the progression of these stages, emphasizing the importance of maintaining a positive relationship with customers throughout their experience.

Diagram 1: The structure of the website emphasizes the “customer experience” in the sales and collection processes

Introduction The first part of the website serves as an introduction, aiming to provide as comprehensive an overview as possible of the world of credit risk management and collections. Further, it lays out a systematic framework for assessing credit and collection risks based on their various components and international benchmarks. Then, the focus will shift to managing these risks, distinguishing between process management from the customer’s perspective and the organization’s perspective. This section introduces the concept of the “credit and collection cycle” graphically (illustrated in Diagram 7) and offers a methodological framework for the efficient and structured management of all credit and collection activities within an organization, including interactions with various stakeholders both inside and outside the organization.

Customer acquisition The second part of the website focuses on customer acquisition management. This section explores all processes leading up to the point where a customer is billed, starting from the initial preparation required by the organization when a customer first encounters the brand and sales proposition. It covers the sales processes themselves, the integration of customer data into the organization’s systems, through to the delivery of the product/service to the customer, and beyond—transitioning to a phase where the working relationship with the customer becomes formalized for ongoing success.

To provide the necessary tools for managing customer acquisition effectively, three additional chapters discuss defining the legal entity of the customer, basic concepts from contract law, and understanding various payment methods. Emphasis is placed on the importance of these elements in managing credit risks and collections.

Receivables and collections management

The third part of the website delves into managing customer debts and collections, covering both the accounting aspect and the preparation for future collections. Initially, it discusses complex ethical issues related to an organization’s relationships with its customers. Recommendations are offered for developing debtor management policies, examining organizational workflows, and covering topics related to organizational control (recognizing sales, managing charges, and credits).

Regarding collection management, the website tracks all collection processes from the simpler to the more complex: from the creation of debt to its collection or the transfer of delinquent accounts to legal action through external attorneys. It lists methods and tools for collections used in interactions with customers and internal organizational operations, as well as models for collection management, including control reports that assist managers in their work. The final chapter in this section discusses managing the collection process through a collection center, which is crucial for organizations dealing with a large number of indebted customers.

Legal collections

The fourth section of the website explores the management of legal collection processes through external attorneys who conduct collections faithfully on behalf of the organization. Rather than focusing on how to collect through the court system, this section seeks solutions to efficiently manage external lawyers to maximize collections for the organization. It also aims to enhance the “collection experience” of the client under the circumstances.

Selected issues

The fifth and final section of the website, titled “Selected Issues,” aims to enrich the specialist’s perspective by concluding with two chapters that illuminate specific points of interest. These chapters are designed to deepen understanding and enhance expertise in areas deemed significant: one chapter analyses the topic of collection costs, offering strategies for reduction, and another discusses reporting and monitoring systems in the field of credit and collections, including the definition of “Dashboards” for management and essential metrics for credit risk and collection managers.

This website is intended to provide the reader with an enjoyable, engaging, and challenging reading experience, hoping to contribute knowledge, tools, and enthusiasm for the challenging field of credit risk and collection management. The ultimate goal is to contribute to the advancement and academization of this important profession.

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6 Essential Elements of a Credit and Collections Policy Framework

Marinko Marijolovic

Director, Corporate Credit, Shurtech Brands

[0:00] Marinko Marijolovic:

Just a little bit of background about my organization before we get started, just so you guys have a feel for where I’m coming from. So I work for ShurTech Brands, obviously, we are located in Avon, Ohio, which is a little west of Cleveland, Ohio. So the weather that you see outside is year-round pretty much up there, except for the two months during the summer. But we’re owned by ShurTech technologies, which is headquartered in Hickory, North Carolina, and they are a little northwest of Charlotte. So kind of get perspective. All of our AR credit collections functions are done in Avon for the entire organization. But we do have a centralized finance team, and we all report under one CFO and so basically, we have a linear reporting structure, but not everybody’s in the same facility. We primarily make tape products. We have plants around North Carolina, we have plants in China, Mexico, there are some facilities as well in other parts of the country of the world and Peru and Dubai and things like that, but we sell to the retail industry. So Walmart Home Depot, Sherwin Williams, Staples; Some of the brands that you guys might have seen from us the most popular is frog tape for painting, but we like if you walk into Sherwin store and buy a general roll of masking tape, they refer to it as cp 66. That’s all manufactured by us.

[1:28] Marinko Marijolovic:

And then we also have a side of the business that sells to the industrial segment, for people that use packaging tape within say, within their plants or electrical tape, things like that. So on one hand, the retail side, fewer accounts, more transactions; industrial side, more accounts, fewer transactions. So we kind of cover the full gamut. Just a little bit of a background as far as you know, what we’re about. So before we do this, what we’ll cover as far as you know, today’s presentation we’ll talk a little bit about aligning your credit collections, and then designing, you know, your credit collection policy. So there are different ways I’ve worked in different organizations, and we’ve kind of put different emphasis on different components. But well, this is a fairly broad overview. So, you know, if you want to be able to write good policy, review your existing one and rewrite it, you know, there’s more in-depth that goes into this, outside of all of this. But anyway, to get started, we’ll be discussing the credit policy, the reporting, and documentation, and then collection strategy, which to me is one of the key components along with the credit aspect of it, and then documenting all your collection efforts and then tackling the delinquent accounts and then obviously collaborating and working at disputes to fall into our realm.

[2:59] Marinko Marijolovic:

So before we, before we get started, and you know why your credit collection policy should be aligned? We’ve got a quick little poll question here :

[3:09] Marinko Marijolovic:

How aligned are the credit collection departments within your company? So can we see a show of hands of folks that they operate in silos? So that kind of totally separate – anybody in that environment? Okay, that’s good. Some people do credit collections. They do both. We have people that do that. Yeah, that’s kind of like, where I think it’s, it’s moving towards, and when you report to the same manager, but there’s, you know, ideal groups, there are different groups of doing credit, people to do collections, anybody with that. And then someone aligned but not formally documented, anybody in that realm. Okay, so it’s really that the two middle ones, just to kind of see the layout of the room. So here’s like a little graph that basically depicts how credit and collections function. This is pretty simplistic but it kind of hits home, if you have a strict credit policy, there should be theoretically low collection work, if you’ve got a loose credit policy, you’re going to drive work within the collections environment. So it’s kind of you to know, hopefully, no one is on either one of these edges that you’ve kind of been pulled it within the center.

[4:24] Marinko Marijolovic:

So, you know, why do you want to have an aligned credit and collections and I kind of incorporate all of AR into this. You know, why is it important? It’s basically you want to make sure that you have an end to end process that covers everything. So from you know, it’s all, as you guys are aware, it’s all intertwined from when you bill it to when cash is received to when a deduction is made. Obviously, when an order is generated, all of it is intertwined and all kinds of plays off itself, you got to make sure that you do have a policy that is fairly clear to the organization to the folks within the credit and collections organization. But, you know, especially the sales and customer service and operations, so you’re not on the defensive, you have a foreign policy, everybody’s clear. And if you have one, you know, make sure you’re sharing it and that you might even want to go to a sales meeting or a customer service meeting and kind of go over it. You don’t have to go over every aspect of it, but make sure that the whole organization is very clear on it.

[5:41] Marinko Marijolovic:

So we’re going to go a little bit about the steps in creating a credit collection policy. So the first part obviously, is the credit policy itself, then the reporting, the collection strategy, and the documentation and then handling delinquencies and the issues the conflict that arises from various issues.

[6:06] Marinko Marijolovic:

So designing credit policy you know, what should it be? How should it be? What should it be driving I guess it would be the proper way to say it. So, you know, I should be able to tell you which customers you’re going to give credit to. And this is kind of where it comes with sharing it with other departments that people are clear that they’re not – if somebody gets turned down then they’re not in the dark as to why and then obviously, define the credit limits how you going to set up limits and then the roles and responsibilities for everybody within the team so everybody knows who to go to and who does what. And then obviously the metrics of what you know, what kind of things do you want to tackle and what do you want?

[7:02] Marinko Marijolovic:

So, the first aspect of this would be creating a mission statement. And then the KPIs I said before, and then the rolls in, and then the best practices would be the key to make sure that you know, your goal should be always achieved, like best in class doesn’t necessarily mean that you’ll get there. But that should be your ultimate goal. As you make improvements, as your organization changes, you need to constantly strive for that so you don’t get left behind. So within the mission statement, you know, it should be supporting the financial goals of the organization, the sales efforts. So this is where you got to get others involved within your organization. So when you’re writing these policies, you can’t like you can’t do it in a vacuum, can’t just sit down and go – “Well, I understand the process of my organization and I’m going to do the whole thing”. You know, your job is to maintain that the highest grade of accounts receivable, obviously, a lot of us in the room use accounts payable to borrow off. So, you know, the banks are interested, obviously your audit team, your CFO, if you report CFO or Treasury, whoever, it’s so incumbent upon you to make sure that that you get input from everyone. And almost like the probably would help to do a little interview with folks to kind of say, “Hey, what, you know, what do we, what are we trying to achieve?”. And then the risk level, you know, there’s that mode today that – Hey, every deal kind of has to be worked out. So you have to, you can’t just say no, but on the other hand, you also have to watch the risk level, your organization, you’re kind of tasked to. You’re basically the front lines of that now, people can go above you and over you, but if you’ve got a firm policy and it’s been established and you got input from everybody else, it will protect you because everybody in the organization is kind of made that decision not just you as a single individual.

[9:07] Marinko Marijolovic:

And then make sure that you’re working with the teams and the various other divisions within your organization. And then for that aspect, especially if you got multiple industries that you’re dealing with, or multiple divisions, locations, if you’re handling global versus, you know, just regional, you know, that’s a big aspect to make sure that you’ve covered all of that. So some of the KPIs are fairly simplistic that one can look at, obviously, the SL is a big thing. everybody’s familiar with the DSO. And people put a lot of emphasis on the DSOs that kind of urge you to make sure you inform the powers that be within your organization that the DSO is not the – be it all kind of the end-all. It’s just one statistical number. Okay? So people freak out when, especially if you have seasonality or customers do not order on a level, month by month basis, you know, order spike.

[10:13] Marinko Marijolovic:

People are familiar with the DSL so they think that they understand it but there are different ways to calculate DSO. So make sure you kind of educate your folks on that, even the finance people will freak out. And then the 90 Plus is obviously key because once it goes 90 was like – I cannot borrow on the AR and the risk level rises greatly. The days delinquent. You know, some people kind of like that measurement better than even the DSO so. And the roles and responsibilities of the team. Make sure that everybody is aware of who’s on the team who does what, you know, what’s the, if you’ve got limits for what people can release what they can what kind of credit limits they can assign, make sure people understand within the organization who they can go to, especially if you’ve got, like, sales team that’s larger and spread out across the country that they’re there. They’re not in the office on a regular basis.

[11:18] Marinko Marijolovic:

And then the whole escalation thing, that everybody knows who they can go to, you don’t want people going over you all the time. But we’re coming to you versus say, you know if you’re in charge of a department versus one of your folks but everyone should be aware of it. And, you know, the responsibilities all the way up to the CFO, and some organizations that I work that, you know, you’ve got certain limits that then they automatically need to go to a CFO if you, you know, get to half a million or something, but make sure that that’s prudent as well as the CFO is just putting their initials on it and them kind of thinking you got to cover then not want to really change that and your audit team should be fine with it. Because if there’s no real effort to it or anyone’s inspecting, if he’s not truly reviewing it, you just lost in time.

[12:11] Marinko Marijolovic:

And so some of the best practices and on a day to day basis, you know, everybody wants to personalize the vibe these days. So when, you know, when you’re onboarding a customer, you know, typically for in our case, there’s a letter that goes out from our customer service team and sales. So you can incorporate some of the AR or credit part of it in that or you can send a separate package or contact the customer if you got time to kind of welcome on board and obviously if you have any questions about their application at that time, and then make sure that very clear if you approve it or not approve it, that everybody knows, and like I said, this is kind of where that involving everybody within the organization (happens).

[13:00] Marinko Marijolovic:

Make sure you are highly transparent because they’ll help you from being reactive to being proactive. Everybody is fully aware, you know if you’ve got a good policy that you believe in, but you haven’t told everybody about it, it’s not really helping you a whole lot. And if you firmly believe in which the past you created, you shouldn’t have any issues with sharing it with them or with the organization or with even with the customer to say, “Hey, this is what our policy is. And based on the measurements, we looked at, you know, we cannot approve you or we’ve approved you for this size of a limit”.

[13:35] Marinko Marijolovic:

And then obviously, the ones that don’t get approved these days, that’s a big deal. Like I said, you got to make the deal work. Nobody wants to hear a no. So it’s kind of – I just had one real quick that we’re entering a new market, they get this customer they want to do $200,000 orders at a time and we have to make the product just specific for this customer. Nobody else would use this product and we check their credit- it’s horrible. And they’re like, “Nope, they can’t be because the customer support calls. Obviously, that’s wrong, but I’ll take care of it and I’ll share my financials”. It’s like, “Okay, good. But in the meantime, can I send you half upfront?” It’s like “Okay, well if you send me half up front, we know there’s a problem somewhere along the way. And so not everybody’s going to be upfront with you”.

[14:25] Marinko Marijolovic:

And then make sure you do your reviews and you know, on the accounts, there’s this habit of that’s not a problem, especially if you’ve got thousands of accounts, there’s no problem you kind of just say, we’re good but you got to figure out some process that you’re going to review them either you know, by size or by credit limits or by age. And then everyone’s favorites, the five seas, obviously, you can read them there. You know you try to incorporate that into your policy. And that should take care of a lot of issues that you have and then you know, on the blocked orders, kind of sense kind of look what’s causing it and then share that with the customer and with the sales because a lot of times they’re kind of kept in the dark as to why our orders are not being released. Or, you know, why do we release some immediately, you know, what’s the issue? In some instances, customers paid, we need the payment commitment, things like that. But, you know, be creative on your toes, I guess. You know, it’s easy to say cash in advance, so are we just not gonna have sold to them? But that doesn’t go over. Well, especially when sales are under the gun even if your sales are increasing – There’s expectations that they need to meet and if the vibe kind of that you project is that you’re the “No” person, you kind of get a bad rap within the organization.

[16:01] Marinko Marijolovic:

So reporting and documentation, you know, everything should be documented in what we do in the credit collection environment, I mean, outside of the policy, you know, make sure that you’re able to run some reports that you know, for your audit, folks like for us, our company, our external auditors, audit our AR to the nth degree, I’ve never worked anywhere where they’re more obsessed about the AR, I have no idea why, you know, they’re more obsessed about our AR then the bank is so it’s kind of fascinating, but, make sure that, you know, you got the supporting documents that, you know, as I said before the transparency that all of that is, you know, being projected, and that you’re following whatever controls you have. So if your audit requires reviews of your accounts at a certain period that’s been agreed upon, you know, make sure you document and obviously, if you’re doing collections and stuff, you know, to document all of that is pretty easy. You just put in the notes, but you know, you’ve got, you’ve got basically a credit application if you’re using agencies, you know, the financials. So if somebody promises you that, they’re going to provide you financials every year, make sure you have some kind of follow up structure, make sure you’re putting that into a secure environment that other people outside of the credit group don’t really have access to. So if it’s online, make sure that you have secured access through passwords and things of that nature.

[17:51] Marinko Marijolovic:

But, you know, the same thing with the with any kind of trade references you get, you know, it is confidential information and should be kept like that. If you end up disposing of it, make sure you know that it’s shredded, don’t just put it in the to be shredded pile. That’s not a good policy. So, and then in a lot of organizations, you have to justify, if you’re increasing or decreasing the credit line, you can just arbitrarily move them around. So make sure that you have some kind of report form that you know, that you’re filling out that says, here’s what we’re basing the movement of the credit limit on.

[18:29] Marinko Marijolovic:

And then just overall, anything that pertains to the customer, make sure you have one spot and that you have access to it and try to keep it in some summary format because you can go back and rifle through old reports. And the best one, as I said, is if you have a form that you can summarize your activity on that account outside of the normal collections work that you do. And then as far as designing a collection strategy – So the credit part obviously is big, you’re deciding what you’re going to do with the account, assigning a credit limit that’s big, if you’re big into financials, are just using the MBE or some other, you know, credit agency. But the other aspect is the collection policy. Then you’ve got to decide like, appear we’re showing like segmentation of the accounts.

[19:37] Marinko Marijolovic:

So, there are different ways to do one of these. This one is based on risk so you can segment your customers by risk. You can segment it by also by the size or the industry, things like that. But make sure you can’t cover everybody the same way. So all the customers you know, kind of are equal, but they’re not going to get treated equally. Kind of like football players, I guess, you know. So make sure that you know that you know what you want to do, we broke, we break our accounts by industry, then with the industry, we break them out by size. And then within that size, we break out the risk actually. So we kind of layer it down. And it’s time-consuming, but it saves you a lot of time in the long term. So this is kind of just showing you as a low risk, you know, medium, high, and how you can move as far as you know, creating a strategy. So if you guys like, I don’t know how many of you guys are using SAP, Oracle or the HighRadius cloud solution, but you have to create a strategy even within that and you got to tweak it and things like that. So make sure you know what you want to do and then tweak it occasionally doesn’t just kind of set and forget it. That’s not a good policy, and then recording the collection calls, obviously, we know the importance of that, you know, if you got to send that to an asset collection agency, whatever you got to do with it, you know, but the key is kind of developing a customer behavior and the promise to pay are big because you can see how many customers are abiding by that or not, and how you know, they’re trustworthy or not. And that should be incorporated somehow into your collection strategy as well.

[21:39] Marinko Marijolovic:

And then like I said before, the reviews are key. I’m going to blow through some of these real quick since I’m given the time kind of card there. Now, a lot of you guys you know, under the gun here, but you know, negotiate with a customer when they go delinquent. You know the easy one is trying to negotiate yourself. Charging interest is fantastic, but I like charging interest on large accounts, large orders. But when I gotta charge interest on like 2000 accounts every month, you know, and I’m going to get like five bucks on each one. It’s highly annoying, because on top of that, now I have to collect the deductions, I got to collect these five bucks if they were going to pay me the money to begin with, I wouldn’t have to worry about the five bucks. So kind of, you know, be practical about that. And then the third party outsourcing agencies, some of its great, but a lot of it, you know, they’ll work out the deal that you’re going to work out anyways. And then litigation. Litigation is fantastic. If you have an internal legal team, the cost is way down. But if you’re using an outside legal team, it gets pretty pricey. So that’s one of those things where you might actually use an outside collection agency because it might be cheaper than just going to an attorney on your own. So you know, keep that in mind.

[23:00] Marinko Marijolovic:

And then conflict resolution. So this is a big one for me. So I just wanted to kind of go over this real quick. So whatever issues the customer has, when it’s time to pay, they’re bringing it to you, you’re the person that they can get hold of the easiest because you’re not going to ignore them because you’re trying to get money, they’re going to withhold payment. And now you got an order on hold, or you’ve got a pass to invoice. So you’ve got to figure out how to address their issues. Make sure that, you know, you can collaborate with other teams in the organization because, you know, if you’re in customer service, you can kind of push it downstream if you’re in sales or if you’re in transportation or whatever. But when it gets down to the collection aspect, that’s it. There’s nobody you know, behind us, the third-party collection agency, I guess, but beyond that, so you got to understand what the issue is you got them saying how your process works within your organization. So make sure you guys are fully versed in how your organization operates and make sure you’re training your people. And, you know, like I said before, go to some of the meetings that other departments have, send some of your folks to either meet, or just send them to goes, you know, sit with a customer service person, or even, you know, still do the sales ride, you know, where you go on a few sales calls, just even if it’s to a good customer, just to kind of see what’s going on, it will make them appreciate a little more and also understand, you know, understand the process a little better.

[24:28] Marinko Marijolovic:

So, some key takeaways, if we’ve got a few minutes here, the Credit and Collections team, you want the whole thing to be aligned, make sure it’s aligned with the whole AR operation, and then make sure it’s aligned from the whole order-to-payment process. You know, if there’s no order because we were restrictive in our credit abilities, there’s no business, there’s no work. On the other hand, if there’s no payment, and there were a lot of orders, guess what, it wasn’t a sale, it was basically a giveaway. So it was the sample that doesn’t help the organization at all either. Make sure you document everything. Start with your policy. If you guys have a policy go back, rewrite it. Hopefully, this will motivate you. If you don’t sit down and write one. These days with the internet, there are great examples out there. Use ones from previous organizations, you worked at – kind of always evolving to your current situation. And then, you know, be a strategic thinker, you know, use the number crunching, use the analytics, the technology that’s offered today. You don’t have to go all-in with every offering, for example, that HighRadius has or some of these other folks. But pick the pieces that worked for you that will are going to help you out and kind of think about your process and think about the ideal way that you would want your process to work and then determine what aspects could you put in easily without a lot of effort or a lot of work and kind of start off small especially if you got like a bigger department. Sometimes when you throw in a lot it’s really you know, really difficult. And then, you know, make sure you’re aware of your customer behavior and you’re trying to analyze that. And you’re always asking the questions you find out, you know, what makes your customer kind of tick and what makes some of your own folks to do things the way they do, especially if you got different divisions, why does one division now have certain issues, the other one does and vice versa. So last but not least, anybody got any questions? I know I was kind of quick and was really broad, but it’s something that was more meant for some of you guys to think through.

[26:33] Marinko Marijolovic:

So the question is how to quickly review your credit limits for your current customers and staff. So be practical, hopefully, in your policy, you stayed for example: if you’ve got a kind of small accounts, where you’ve given them like three to five thousand dollar credit policy, I mean credit limit, a lot of in a lot of those instances, there’s not a good reason to review it unless your company is really tiny, you know, you’ve got to be practical, what risk you can take so make sure you segment that. There are certain ones that probably you don’t need to review, you can just review based on the run some, have IT run some reports based on you know, average days to pay and number days delinquent, things of that nature. And then you can also do a middle gap, I guess we pulled some reports and if they were within a certain rating, just you know, either up their limits or give them what they need. So have IT run some reports of how many people are going avail limits where they’re adding their limits. And then the other one, obviously, the larger ones, the riskier ones that have issues that are key, you know, you’re gonna have to do those by hand and in alliances, you got to call them and ask for financials and go through that and then you know, if you’re doing like a Z-score model, you know, you can set something up like that. Previous company that I worked at, that’s all we did. We were just strictly Z-Scores. We didn’t care about anything else, you know, so if you didn’t provide us with financials, we just didn’t do business with you. Now, in some instances, we had to go visit them because they wouldn’t send them but you know, that’s kind of how to work.

[0:00] Marinko Marijolovic: Just a little bit of background about my organization before we get started, just so you guys have a feel for where I’m coming from. So I work for ShurTech Brands, obviously, we are located in Avon, Ohio, which is a little west of Cleveland, Ohio. So the weather that you see outside is year-round pretty much up there, except for the two months during the summer. But we’re owned by ShurTech technologies, which is headquartered in Hickory, North Carolina, and they are a little northwest of Charlotte. So kind of get perspective. All of our AR credit collections functions are done in Avon for the entire organization. But we do have a centralized finance team, and we all report under one CFO and so basically, we have a linear reporting structure, but not everybody’s in the same facility. We primarily make tape products. We have plants around North Carolina, we have plants in China, Mexico, there are some facilities as well in other parts of the country of the world and Peru and Dubai and things like that, but we sell to the retail industry. So Walmart Home Depot, Sherwin Williams, Staples; Some of the brands…

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Trusted By 800+ Global Businesses

HighRadius Collections Software automates and optimizes the credit & collections management process to improve collector efficiency, minimize bad debt write-offs, improve customer relationships, and reduce DSO. It provides a complete set of tools to optimize and automate the credit collections management process and enable the better prioritization of credit collections activities All the information you need (invoices, dispute information, POD, claims, tracking info, etc.) on each case is automatically presented in a collections work-space and is ready for use. Apart from the wide variety of benefits that it has, it also comes with some amazing features like CADE (Collection Agency Data Exchange) , collector’s dashboard which has prioritized collections worklist , automated dunning & correspondence , dispute management , centralized tracking of notes , call logs & payment commitments along with cash forecasting functionalities. The result is a more efficient collections team that contributes to enhanced cash flow and reduced DSO.

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Analytical Credit Risk Case Studies

Our credit and risk specialists leverage Credit Analytics, our suite of cutting-edge analytical models to provide you with credit risk insights and real-life case studies on the topics that are important to you and your business.

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Market Volatility

Customer risk, supply chain, industry assessment, transfer pricing.

We’ve recently experienced some of the most extraordinary events in our lifetime, a full year of the Russia-Ukraine conflict, global monetary interventions to fight one of the most significant inflations in recent history, and a continuing threat from global COVID containment policies that continue to disrupt supply chains today.

It goes without saying that the importance of monitoring and embedding macroeconomic factors into credit risk assessments is critical.

Read the results from our recent research where we assessed the credit risk of 22 industry sectors (Corporates and Banks) in the United States and compare historical trends based on the probability of default score generated by the RiskGauge™ Model, with forecasted trends based on this score conditioned with macroeconomic scenarios.

READ THE FULL REPORT

The Continued Evolution of Credit Risk in the European Union and the United Kingdom

Anticipate the Unknown: Insights to Turn Market Risks into Business Opportunities

European Industries Most Impacted by the Russia-Ukraine War from a Probability of Default Perspective

A Fundamentals Approach to Detect Early Signs of Private Company Credit Deterioration

Go Beyond Fundamentals to Uncover Early Signs of Private Company Credit Deterioration

Credit Score Implications of Russia-Ukraine War

Silicon Valley Bank: Uncovering Regional Bank Stress with Equity-Driven Credit Models

It’s different this time: a banking rhyme, how to assess risk appetite in trade credit, bed bath and bankruptcy using quantitative credit models to predict corporate defaults.

Christopher & Banks Corporation – tracking the early-warning signals of credit risk

Default Insights: Avianca Holdings S.A. - Tracking the early warning signals of credit risk

SAS AB Tracking the early-warning signals of credit risk

Car rental industry’s credit risk: a bouncy ride during the pandemic

Understanding Drivers of Credit Risk: Differences and Similarities in the Credit Risk Assessment of a Non-Financial Corporation via a PD Scoring Model

Tracking Credit Risk of a Major U.S. Retailer

In the past, only large financial institutions have ventured into deploying credit risk automation and workflow systems due to the volume of resources and investments required and the need to lock down processes. However, it is not uncommon today, to meet with a corporate credit risk officer who is looking to discuss the options, benefits, and risks of automating customer onboarding and credit risk management and monitoring processes.

Read about the risks and opportunities of credit risk automation here.

READ THE BLOG

Data That Delivers: Automating the Credit Risk Workflow

Machine Learning and Credit Risk Modelling

Managing Credit Risk Automation during Economic Uncertainty

Get a deeper view of your credit risk exposure.

Continuous financial health management of suppliers, minimizing counterparty risk in supply chains, gauging supply chain risk in volatile times, covid-19’s wake-up call for supply chain credit risk.

SEE THE FULL BLOG

Corporate Credit Risk Macroeconomic Recovery Projections Post-COVID-19

In the U.S., continuous government stimulus payments and efficient vaccine rollouts have further revived both supply and demand for goods and services. However, although public companies began publishing financial reports for the second quarter of 2021, the results did not show the full extent of the global recovery, due to the intrinsic lag effect of financial performance.

To help navigate these transition times, we used our Macro-Scenario model to analyze how the credit risk of public and private firms in the U.S. may change under different macroeconomic projections.

Highlights include:

• The degree of economic recovery in different industries is mostly driven by the characteristics of post COVID-19 positive macroeconomic projections.
• Energy, industrial products, and construction materials, as well as retail and media industries, exhibit the best recovery over the Q1 2022 outlook when compared with the baseline scenario.
• The real estate and construction materials industries also show strong recovery and transition in credit risk.

The Bankruptcy Outlook and a Trifecta of Factors: Global Risk, Inflation, Rising Rates

COVID-19: Company Fundamental Scars and the Path to Recovery in Asian Economies

Corporate Credit Risk Trends in Developing Markets An Expected Credit Loss ECL Perspective

Corporate Credit Risk Trends in Developing Markets: A Probability of Default Perspective

Uncertainties Impact Credit Risk in the European Union and the UK

How to Take Control of Intercompany Financing

A large accounting firm automates its credit assessments for transfer pricing, successfully navigating the complexity of intercompany financing, law firm leverages scorecard approach to support transfer pricing engagements.

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CREDIT WHERE IT’S DUE

Case studies and testimonials from those we’ve helped

Success Stories

Debt collection case studies.

Since we were established in 2001, we have helped businesses with a wide range of debt recovery and credit control requirements and possess the expertise and track record that are critical to delivering results for our clients.

Here are some of our most recent success stories. Scroll down to view our case studies by sector or service:

“More valuable and productive than any solicitor”

When it comes to debt recovery, knowledge is power. But, don’t just take our word for it. Here’s what a recent client had to say about our services.

Powering collections

How we assist this UK-based supplier of commercial gas and renewable energy with the collection of their aged debt.

Persistence and perseverance

Read how our team recently collected the final payment from one debtor – almost EIGHT YEARS after the first payment was made.

“We are delighted the debt has been recovered”

Chasing payment from one particular customer was taking up valuable time for forward-thinking business solutions company, Wupwoo Limited.

A calm and professional approach

Our debt collection team has helped a PR agency recover more than £6,000 in overdue and disputed invoices from a particularly difficult customer.

Payment received just 7 days after instruction

Hilton-Baird Collection Services has successfully recovered £12,153 only seven days after being instructed by a UK brewery.

A quick turnaround

For one cardboard box manufacturer, an overdue payment of over £10,000 was becoming the unceasing headache no company wants to deal with.

Debt collection expertise overcomes false payment promises

We have successfully recovered almost £11,000 in overdue invoices on behalf of a supplier of marble, granite and quartz.

“A platform to move our business forward”

See how our receivables management service helped a leading supplier of school uniform improve their credit control performance to set them up for success.

Preserving your relationships

See how we helped this Polish private jet airline recover payment from a valued customer without damaging their relationship.

Someone To Rely On

Read why this recruitment agency now has a debt collection agency they can depend on when their customers fail to pay their invoices on time.

Recruit The Experts

Whilst all businesses strive for fast growth and success, the reality is that this often brings its own challenges. Our client, aware of the importance of credit control for his newly acquired business, enlisted Hilton-Baird to take control of the process from invoice to payment.

Getting The Right Results

With a customer avoiding all phone calls, and a quick web search revealing they already had a CCJ, our client decided it was time to call in the experts.

Navigating Tough Processes

Sometimes the hardest part of getting an invoice to be paid is simply making the customer acknowledge the debt. See how we can help in these circumstances.

Outstanding Triple Success

Chasing late payment can be time consuming but at Hilton-Baird we’re skilled in recovering debt quickly and this experience helped our client get paid.

Deciding Which Step To Take

Once an invoice exceeds terms it can be difficult to decide what to do next. But at Hilton-Baird we use our expertise to guide businesses through the process.

A Trusted Resource

Using our debt collection expertise enabled our client to focus on fulfilling customer orders without having to worry about chasing overdue payments.

Overcoming The Odds

With the debtor facing CCJs and winding-up petitions, our team used all its experience to bring a successful conclusion to this difficult case.

Dispute Resolution

See how we helped our client secure payment in full plus statutory interest, compensation and court fees when they encountered a difficult customer.

Recognising Which Route To Take

When a jewellery wholesalers encountered a difficult customer that was ignoring their collection efforts, Hilton-Baird was on hand to help deliver a positive outcome.

Improving Performance

Take a look at how our confidential credit control service has helped our client to improve their cash flow by reducing their overall debtor days by 24%.

Regaining Control Of The Situation

Read about how we collected more than £10,000 on behalf of an international retail giant to bring a successful conclusion to difficult circumstances.

Giving Credit Where It’s Due

We were instructed by a chartered surveyor to recover an unpaid invoice of £17,000. After explaining why the client was liable, they had no hesitation paying.

Providing A Helping Hand

Not all businesses require fully outsourced credit control but being able to turn to a trusted debt collection agency can help – as iQ Group found out.

A More Personal Touch

Our client had tried everything to recover an unpaid invoice, including a CCJ. Unable to get results, he contacted Hilton-Baird and we collected the debt.

No More Late Payment Excuses

Late payment excuses can be frustrating, but at Hilton-Baird we’ve heard them all and this knowledge helped our client, Cryer & Stott Cheesemongers, get paid.

Three Invoices; Three Successes

Hilton-Baird quickly collected three invoices in quick succession on behalf of Harveys of Oldham, a manufacturer and supplier of clothing.

A Nudge In The Right Direction

The strategy developed by the team at Hilton-Baird Collection Services proved to be a nudge in the right direction for ADEC Marine Ltd, a supplier of marine safety equipment.

Making Contact At Last

Ben Cooper, Operations Director at New Guard Coatings, gives his account of how we helped after a customer owing more than £3,000 disappeared.

Quick And Effective Process

Plastic Plus Ltd found out just how effective third party involvement can be when attempting to collect an unpaid debt. See how we helped them get paid. 

A Simple Solution To Non-Payment

The Ryan Partnership was left with little option but to seek the help of Hilton-Baird after a customer avoided their attempts to collect a £20,000 debt.

Retaining Focus To Get Results

With their customer avoiding payment as well as most forms of communication, SMC Safety Solutions turned to Hilton-Baird to recover their outstanding invoice.

Excuses, excuses! Are they genuine?

Hilton-Baird successfully recovered an unpaid debt of £11,000 on behalf of SG Heating & Plumbing after the customer refused to pay due to a dispute.

Making The Most Of Your Options

Our collections team recovered £6,000 that was more than a year old on behalf of Protan (UK), a multi-million pound supplier of single ply roofing systems.

Reminders Going Unanswered

Hilton-Baird Collection Services successfully recovered an unpaid invoice in full, plus statutory interest, on behalf of Radio Taxis. See how we helped.

Tackling Late Payment

Southampton-based manufacturer, Shore Cast Solent, engaged our services when a customer was proving elusive when it came to payment.

Extinguishing Bad Debt

Utilising the specialist services of a debt collection agency can improve the chances of recovering monies owed, an opportunity Kraft & Bauer didn’t pass up.

Celebrating Our 200th Client

Ship-Elec (Electrical Wholesalers) Ltd became Hilton-Baird Collection Services’ 200th client when they instructed us to recover an invoice valued at £11,000.

Building Trust In Challenging Times

There are occasions the legal process is the only option to resolve disputes and encourage a customer to pay, a scenario which arose in this challenging case.

Tactful Enforcement

After a CCJ obtained against a customer had no effect whatsoever, Streamline Taxis approached Hilton-Baird to recover the sum on a success-only basis.

Options At Your Disposal

Despite appearing to be the most forceful, taking the legal route to recover a bad debt doesn’t always turn out to be the most successful. See how we can help.

It’s Always Good To Talk

Hilton-Baird maintains regular contact with our clients, keeping them informed throughout the entire debt collection process as to the progress we’re making.

Making Use Of The Alternatives

Specialist debt collection agencies are so valuable at assuming the burden of particularly overdue debts by employing a success-only pricing structure.

Making An Impression

Hilton-Baird prides itself on providing the best possible service and exhausting all available avenues in order to recover a debt. See how we helped this removal company.

Making Use Of Our Expertise

Inside Time has secured an arrangement with Hilton-Baird whereby they instruct us to collect any debt that exceeds 90 days on a success-only basis.

Focusing On Business Growth

The importance of recouping the time and resource required to win new business is often overlooked when deciding whether to outsource your credit control.

Learning How To Juggle Your Time

Due to the downturn and extensive challenges it has brought, business owners have been faced with a juggling act in order to keep their business growing.

Pinpointing Their Location

Such are the trading conditions at present that customers with a track record of paying on time could be susceptible to falling foul of the economic climate.

Adapting To New Situations

After their client’s continued false promises that payment was just around the corner, Sweet TV instructed Hilton-Baird to recover a debt of £8,500.

Easing Debtor Insolvency Fears

Hilton-Baird moved swiftly to recover £3,000 across several invoices as our client’s concerns grew over the financial security of its late paying customer.

The Added Weight Of Collections

When endless phone calls and emails go unanswered, the sheer presence of a debt collection agency is often suffice to persuade the customer to pay up.

Selecting The Right Move

It is tempting to take the legal route once an invoice exceeds terms but, despite appearing to be the firmest approach, even this tactic sometimes falls short.

A Tactical Approach

We’ve all heard the raft of late payment excuses, but what do you do when the money continually doesn’t materialise? DCAs excel at recovering what you’re owed.

Overcoming Late Payment Culture

Hilton-Baird was engaged by SQ Computer Personnel to assist with the recovery of their oldest debts, those that require the most care, time and expertise.

Removing Barriers To Debt Collection

Hilton-Baird called on all its expertise and multilingual prowess to successfully recover the outstanding debts of a London-based publisher.

Multilingual Expertise

Language barriers can lead to delays to the recovery of debt in today’s globalised world, but our team’s multilingual capabilities keep us on the front foot.

Long term support for leading leasing and finance solutions business

See how we have helped our long term client, a leading leasing and finance solutions provider, with their debt recovery needs.

Interim credit control resource provides invaluable support

See how we helped an invoice finance client by providing short-term, outsourced resource to support their factoring credit control function during a challenging time.

£5.5 million collected to recover lender’s position

Hilton-Baird Collection Services has successfully recovered the position of an asset based lender after their client entered administration, and is now supporting the insolvency practitioner with the remainder of the ledger.

Ledger monitoring service key to positive outcome for lender and creditors

Hilton-Baird Collection Services has provided a multifaceted service, incorporating pre-insolvency planning, ledger monitoring and debt recovery, to support the Insolvency Practitioner and asset based lender both before and after their client entered administration.

£3.3 million recovered after sub-prime lender enters administration

Hilton-Baird Collection Services has successfully recovered £3.3 million after an FCA-regulated sub-prime car finance company entered administration.

Successful recovery despite missing paperwork

Hilton-Baird Collection Services has successfully recovered almost £2.5 million on behalf of an invoice finance company after their client entered administration.

Recovery of contractual debt

Hilton-Baird’s experienced team has successfully recovered its client’s lending, despite the debt being highly contractual in nature.

Numerous challenges overcome to recover lender’s position

Our collections experts have recovered the position of an asset based lender despite numerous challenges, particularly regarding paperwork and proof of debt.

ABL’s position recovered after client enters administration

Hilton-Baird Collection Services has successfully recovered the position of an asset based lender after their client in the fresh foods sector slipped into administration.

Perseverance and expertise deliver results

When a supplier of security guards went into administration, Hilton-Baird was engaged by the invoice financier to assist with what initially appeared to be a straightforward recovery.

Confidence To Continue Funding

Read how our receivables management service gave an invoice financier the confidence to continue funding their client whilst giving them a platform to thrive.

Impressive Results In Challenging Circumstances

We successfully collected 91% of an £835,000 sales ledger on behalf of a major high street bank when an industrial fasteners supplier entered administration.

A Fast Response Delivers Outstanding Results

Hilton-Baird responded quickly in order to deliver an outstanding result when instructed by an IP to recover a sales ledger of more than £750,000.

Delivering Results Under Pressure

Hilton-Baird was instructed by an insolvency practitioner to recover the sales ledger of an environmental services company which had just entered administration. After overcoming several hurdles along the way, we produced an excellent result in exceptionally challenging circumstances.

Demonstrating Our Worth

When Hilton-Baird Collection Services was instructed by a leading bank to recover a ledger valued at £250,000, at first glance there didn’t appear to be anything out of the ordinary. Behind the scenes however, this collect out was about to become much more complicated.

With Time Of The Essence

Hilton-Baird Collection Services was recently instructed by a business recovery specialist to recover the ledger of a high profile case. By getting on site quickly, we were able to gather the necessary documentation to support the ledger and commence the collections process.

Pinpointing The Problem

Collecting monies due once a company has ceased trading always proves more challenging, but when the products supplied have a warranty in place, this can become even more difficult. However, Hilton-Baird worked with the funder and its client to ensure a successful conclusion.

A Fresh Approach To Collections

Sectors such as the fresh food industry naturally pose more of a challenge to a commercial debt collection agency than others, but Hilton-Baird’s award-winning approach allowed us to liaise with our client’s customers and implement suitable payment plans that resulted in the full ledger being collected.

Exceeding High Expectations

Though the debt collection process typically has several hurdles that must be overcome, there are always some cases that throw up more obstacles than most. One client in particular had recently entered administration but, without access to project sign offs and other essential paperwork, our expert team has fully exceeded expectations.

Utilising The Tools At Our Disposal

Particularly when cash is tight, business owners will always be looking for excuses not to pay. From the point of view of a commercial debt collection agency, purchase order numbers are vital when chasing customers for payment, so Hilton-Baird ensures it has everything at its disposal in order to maximise the recovery.

Working Quickly To Maximise Recovery

Hilton-Baird’s commercial debt collection expertise was put to the test earlier this year on a particularly challenging ledger riddled with insolvencies.

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Credit and Collection Management Practices, Credit Risk Management, and Financial Performance of Private Higher Educational Institutions (HEIs) in the Philippines: Basis for Continuous Improvement

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Abstract: The main objective of this study is “To find out the importance of knowledge credit risk management and profitability”; the sample size of this study was 100 The Main purpose of this study is to investigate the relationship between risk management and profitability in Mogadishu Somalia. The objective of this study was “To find out the role of job satisfaction respondents, including officers and staffs also profitability the type of the study was sampled-random sampling. The study also used through descriptive research design and questionnaires as the main instrument for collecting data. The questionnaire consisted of structured with closed End questions. Data was analyzed by assessing the frequency of respondents per question. Tabulated frequencies analysis was made using Statistical Package for social science SPSS version 20 to present the data analyses. The researcher finally found there is a relationship between risk management and profitability in objective one the researcher found that there is a positive relationship between Role of risk management and profitability which is 3.23.the the Mean range is good; in objective two the researcher found that there is a positive relationship between risk management and profitability which is 3.08.the Mean range is good; finally the researcher found the result indicated that there is weak positive correlation as indicated r. Value 0.980 this result mean, if the relationship credit risk management increases the Profitability increase and researcher recommend “In order to increase Profitability we should create a lot of credit risk management relationship”; “To manage flows between and among stages in a credit risk management relationship to minimize total cost”; “ Relationship credit risk managements primary factor that is necessary to Organization”

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Consumer Credit Case Studies

Each credit report and financial situation is unique, we have come across thousands of unique cases over the years. Below is a number of real life case studies (all names and personal details have been altered to protect their privacy).

Debt Consolidation – Case Study of Sherry:

Sherry is earning $100,000 with $30,000 of credit card debt and very high expenses. Her balances are very close to limits and some over the limits. She wants to pay her creditors but can’t handle the high interest rates and increased minimum payment. She owns a condo in Manhattan with a little equity and had a piece of property upstate with a value of $30,000. She was denied a loan against her property because of low scores from her very high balances on her revolving credit card debt and although her property was on the market it was not selling. Debt Consolidation may be the best choice for Sherry since her interest rates could be reduced to 6% rather than the 23% she is paying currently. She will pay them a small fee plus a reduced monthly payment which they will deliver to her creditors. It is important that she knows the Debt Consolidation Company may make her reduced monthly payments late or put a mark on her credit profile stating she is in a debt consolidation plan. This mark can affect the scores negatively. She can also ask the DC Company to keep this info off her credit profile and to make sure payments are made on time but there is no guarantee this will occur. We have seen the scores drop dramatically because of these marks. The credit can always be cleaned up in the future when she gets a handle on her debt. If Sherry is saving 17% interest on her $30,000 and her payments are not drawn out for 10 years it could be a good choice in this situation.

Loan Modification – Case Study of Amanda:

Amanda was a professional with a family owning a home upwards of $1,000,000 in Long Island. After owning the home for a year she took a loan on the increased value to renovate (about 29 months ago). Amanda has a salary of over $250,000 and is the only income earner in her family. She called to ask about Debt Settlement after talking with a Debt Settlement Company that called her. She owed over $175,000. Was barely covering her mortgage and was having difficulty paying her credit card debt. Her interest rates on the credit card debt were hiked up because her balance was very high if not at the limits. The Debt Settlement Company most likely found her on a list the credit reporting agencies sold seeking out high debt individuals. They told her that her credit would not be ruined (even though she would have to stop paying her debt) and she would probably not have to pay taxes on her savings. She would have to put money into a bank account through them until she saved up enough money for the Settlement Company to pay the creditors 40% of what she owed. They would take their fee first and when she had enough savings they would begin to negotiate her debt. Most of this was false. If you don’t pay your bills on time you will have late payments on your credit report END OF STORY. She really needed to look into getting a loan modification first since the amount of her mortgage was, most likely, more than her property value. If she had many settled accounts with late payments she may not have qualified for the loan mod. We referred Amanda to an Attorney to discuss her mortgage situation and advised her against debt settlement until she examined the loan mod option first. She also needed to find out what the tax ramification would be if she had $100,000 + added to her $250,000 income after her credit card debt was settled for less.

Debt Settlement – Case Study of Joe:

Joe is an elderly man whose business just dissolved. He has a home with a small loan and large value. He has savings but his wife was ill with a chronic disease and he was suffering from depression. He owed $40,000.00 in credit card debt and had a 750 credit score. He and his wife were not making any income. After speaking with him for a while I learned that he did not need his credit and was not concerned about his scores reducing. He was not a candidate for bankruptcy and it made sense for us to negotiate his debt. The creditors would not even speak to us until he was 4 months late and his credit score dropped. It was a tough situation for him and his wife since they were bombarded with harassing phone calls (even after telling their creditors to stop calling them) day and night. They thought it out and we were able to save them about $24,000. They were very happy and relieved at the end of the process. It did cost them for our services and the taxes paid on their savings to the IRS but in the end it was the best decision for them. Remember each situation is different in terms of taxes paid and must be discussed with your CPA.

A Credit Story – James & Ava:

Take James and Ava, both teachers, and about to get married. They have plans to buy a home in the suburbs of Long Island N.Y and start a family as soon as possible. James had some credit management issues however—late payments with accounts that he did not pay at all. He is now in his late twenties and has not addressed these credit issues in a few years.

Ava, on the other hand, has always been diligent about managing her credit and paying on time. She has a 745 Fico score while James’ score is in the high 500s. Since they need both incomes to cover the cost of the mortgage, both of their credit scores are essential for mortgage approval. Unfortunately, James also had some student loans that were defaulted on. Therefore, he can’t get approved for an FHA backed loan. The government does not want to approve a loan they insure if the applicant has previously defaulted with them. This puts the couple in a difficult situation. Since real estate has dropped dramatically, they now have the opportunity to afford a home in a better school district which will enable their children to have greater success in the future. If they decide to wait until James’ credit naturally gets better, it could be 5 years and prices on homes may be much higher.

This is a very stressful way to begin a life together and start a family. Ava is disappointed and resentful that her plans must be set aside and the relationship is already on shaky ground before they really even begin the life they wanted together.

A Credit Story – Larry:

Larry is a real estate broker and has just come across a property that is an incredible value. He had no intention of purchasing an investment property but he knows this deal is a once in a lifetime opportunity. Larry has been a great credit manager and has a Fico score of 785. Although his income has lowered dramatically due to the economy, Larry has worked hard to insure his credit is protected and therefore he was able to qualify for the best loan at a very low interest rate. If Larry’s score was below a 740 he would have been denied the funding needed. The property is valued at $800,000 and Larry will be renting it out. He will earn $3000 a month in profit of rental income once the deal is done.

Larry’s credit has afforded him a great value and extra income at a time where he needs it most. If he had James’ credit this would never have happened. As you can see, this credit situation is quite the opposite of what happened with James and Ava. In Larry’s situation great credit was able to provide him a great opportunity.

A Credit Story – Sam & Carol:

Sam and Carol, both successful Attorneys in NYC had been looking for an apartment for well over six months. They were having difficulty compromising to find a place that met both their needs for practicality, style, neighborhood, and price. After much difficulty they finally found the perfect Manhattan Condo that brought all their qualifications together, while fulfilling their aesthetic dream.

When they first started their apartment hunting both their scores were well over the 740 fico requirement. With combined income of over a million dollars, good assets, and low debt ratio, it seemed like a slam dunk for loan approval. However, due to the length of time since credit was pulled the banker had to run new scores for loan application. Carol’s score dropped to a 652 which meant they would be denied mortgage approval. They were both astounded and angry when they learned that Carol had a tax lien recently updated on her credit which was placed in error dropping her score at least 60 points, as well as a recent late payment on a Bloomingdale’s card. By the time Carol and Sam found us they had only a week to get the score increased before losing the property. Carol was devastated and felt it was her fault they were going to lose the home of their dreams.

A Credit Story – Jim:

Jim, a high powered executive, and his wife Susan, an art dealer, were getting ready to refinance the $900,000 that was left on their mortgage. Since their Fico scores were around a 770 their current rate of 5% would be reduced down to around 3%. This would save about $1000 a month and around $300,000 over the life of the loan. Throughout the process of refinancing Jim was traveling and took a very long time to get all the documents the banker needed for loan submission. Since so much time had gone by the bank required a new credit report with the application. Unfortunately, when the credit was pulled Jim’s score dropped by 80 points. Jim had opened two new credit cards not realizing his average age of credit would be reduced by these new born accounts which would drop his scores. He had no way of knowing the two zero percent balance transfer cards would now be costing him $300,000.

Carol and Sam were very lucky and were able to qualify for loan approval. Within a week we had success removing the lien from Carol’s credit profile and her scores went up to 715. With the couples ability to put more funds down and the increase in score they were able to get loan approval.

Unfortunately for Jim and his wife there was nothing anyone could do to help. Once new accounts are opened only time could increase the average age of credit and ultimately the credit scores.

When advising clients on paying down debt, it is important that the credit profile be evaluated individually. Speaking with a Bankruptcy Attorney, Debt Consolidation Company, Mortgage and Loan Mod expert, a good Realtor for short sale info, and a Credit Restoration firm are very important to make an educated decision. There are some professions that will not hire a person with a bankruptcy on their record so when seeking info make sure to ask about this possibility and how it relates to your career.

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Managing credit and collection during the pandemic

Collecting accounts receivables (A/R) is the lifeblood of any business, but the global recession has placed tremendous pressure on business operations. Many are struggling to stay afloat while others have completely shut down operations, which makes A/R collection challenging.

A 2020 global study by CRIBIS Dun & Bradstreet revealed a deterioration in business customers’ punctual payments to their suppliers. In its June 2020 Asian study, which included Thailand, Taiwan, the Philippines, India, Hong Kong and China, Thailand showed the highest degradation rate on on-time payments at 15.4 percent, followed by the Philippines at 5 percent and Hong Kong at 3.1 percent.

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Making the case for artisanal and small-scale mining

• Morgan Sherburne

EXPERT Q&A

Artisanal and small-scale mining plays a critical role in supplying the world with minerals vital for decarbonization, but this kind of mining typically lacks regulation and can be socially and environmentally harmful.

Despite ASM’s significant challenges, University of Michigan researchers argue that artisanal and small-scale mining, or ASM, should be embraced.

Minerals such as cobalt, copper, lithium and nickel are necessary components of electric vehicle batteries, wind turbines, photovoltaic systems and battery storage units. Artisanal and small-scale mining, or ASM, provides as much as 20% of the global supply of these minerals.

“There is no decarbonization without mining these and other minerals. To move away from coal, oil and gas, the global energy system must mine critical minerals,” said Brandon Marc Finn , a researcher at the U-M School for Environment and Sustainability. “At the same time, we argue that ASM should be recognized as an essential social and environmental justice issue of our time.”

ASM plays a central role in local economies as well, Finn says. About 40.5 million people around the world participate in ASM in 80 different countries, and up to 270 million people depend on it. However, ASM is linked to environmental degradation, can be detrimental to health outcomes, and is frequently associated with human rights abuses, including child labor. ASM workers generally operate with limited capital, for minimal pay, and without social safety nets.

“ASM workers choose artisanal mining because they often do not have comparable alternative livelihood options and this work supports them and their families. They adopt informal, often unregulated working practices because these typically have lower barriers to entry into the market,” said Finn, also a core faculty member at the U-M Center for Sustainable Systems.

To better understand ASM, Finn conducted three fieldwork trips with mining communities in the Democratic Republic of the Congo to trace the start of the cobalt and copper supply chains. He discusses the challenges and future of artisanal and small-scale mining in a study published in the journal Energy Research and Social Science. His co-authors are Adam Simon, professor of earth and environmental sciences, and Joshua Newell, professor of environment and sustainability.

What is artisanal and small scale mining?

Artisanal and small-scale mining is typically mining that is very labor intensive. Miners use mostly rudimentary tools such as picks, axes and shovels. It generally does not use overly mechanized processes such as large scale diggers or dump trucks. These mines are usually composed of hand-dug tunnels extending tens of meters deep, open pit mines, or the mining minerals from old waste (tailings) from industrial mines. It is typically above ground and therefore more easily accessible.

ASM miners may lack transparency around pricing, the weighing of their ore and the grade of ore they have mined. The argument we’re making regarding ASM is to act in good faith and not pretend these problems don’t exist. We document many of the challenges in the paper. While many regard the problems as symptomatic of ASM mining, we argue that ASM itself is symptomatic of long-term marginalization.

Many large tech companies seek to exclude ASM from their supply chains. This threatens to worsen the living conditions and livelihoods of millions of people. Hundreds of millions of dollars have been spent trying to “formalize” ASM mining practices and have largely failed. This is, in part, because they misunderstand the problem. ASM workers choose artisanal mining because they do not have comparable alternative livelihood options and this work supports them and their families. They adopt informal, often unregulated working practices because these typically have lower barriers to entry into the market.

Rather than look away from the problem and try to exclude ASM miners from global mineral supply chains, we should turn towards them, and to the social, economic and geopolitical reasons that make ASM necessary in the first place. This is all the more essential given soaring demand for critical minerals, such as cobalt and lithium. With hundreds of billions of dollars invested into low-carbon technologies, some of this money should support the most vulnerable parts of the workforce that mine the metals that enable our lives and will sustain the global energy transition.

What are some of the challenges associated with artisanal and small-scale mining?

The dangers or risks emerge because there’s often very little regulation and enforcement of occupational standards. If you overregulate, then you potentially cut people out from participating in ASM. But if you don’t regulate at all, you also face issues such as tunnels that are structurally unsound, or the complete lack of assessment of breathing conditions when you’re 30 or 40 meters underground.

There are significant issues in terms of health for miners such as dust inhalation, silicosis and exposure to mercury. Mercury also goes into water bodies, with impacts extending beyond the individual mining site. There are issues of dust pollution and severe environmental pollution, deforestation and others, all of which are not exclusive to ASM. They occur at and beyond industrial mines too.

To me, these issues are relatively straightforward to regulate and improve upon if you have governance structures in place. The honest, transparent and pragmatic position is that these conditions exist and we should mitigate as much harm as possible, and distribute the wealth generated from industrial mining more fairly.

Another very challenging issue with ASM is that of child labor. Recent pathbreaking scholarship from Andrew Gulley estimates around 2% of cobalt comes from child labor specifically, which sounds pretty low, but when you realize that industrial mining employs a small fraction of the workforce that ASM mining employs, you realize it takes many more hands to produce one percent of ASM-mined ore than it does for industrially produced ore.

I do have an abolitionist view on child labor: I don’t want children working in mines or with dangerous equipment but I think the reason they do is because the alternatives that families have are nearly nonexistent. A way to deal with that is to take a more realistic perspective in terms of regulating ASM in designated ASM areas with enforceable standards and fair pay to workers.

What are some solutions to these issues?

I think the first kind of solution is for us to be able to understand how artisanal and small-scale mining happens and why it happens. Because of the socioeconomic realities that people face, people make rational decisions to get into ASM mining because they need to provide for themselves and for their families. I think when we understand why it happens, we have to take a more holistic approach on how we deal with ASM. And it’s not just on the mining side: it’s the politics and the economic structures that inform the conditions that create ASM.

It’s also the royalties and taxation received by national governments from industrial mines, which do not sufficiently benefit ordinary people on the ground. Industrial mining companies owe more to impacted communities than they pay. This is especially because they are sometimes implicated in housing displacement and widespread environmental pollution, but also because they extract so much value from the ground. Industrial mining companies have a fundamental duty and a moral obligation to the people whose land they’re on and resources they are extracting from. This includes supporting ASM workers. Bringing industrial mining into the artisanal mining debate is important because I want to try to hold them more accountable and show how they are related.

On the other hand, I think development organizations like The World Bank need to adopt more heterodox thinking to ASM mining and development. The World Bank has spent hundreds of millions to try to formalize artisanal and small-scale mining, but I think that’s often not a conducive approach. You can’t start by trying to instill the outcome you want if that very outcome threatens peoples’ ability to earn a livelihood. You need to find some middle ground between doing nothing and overextending your reach to formalize an industry, and thereby risk threatening livelihoods.

There do need to be minimum standards for ASM. For example, ASM mining zones need to be designated to miners, and these zones must have decent and abundant ore grades. Once you have a reasonable designated zone, you’re able to enforce the occupational, environmental and social standards. However, this is only part of the problem. Minimal standards need to apply to the point of sale, too. ASM miners should be compensated fairly and transparently for the material they produce. This point of sale should be regulated as much as the mining itself.

These areas should have the requirement of not using child labor. But regulating bodies should offer alternatives which put families in better positions without child labor than they would have been in with their child being on the mining site in the first place. This also entails paying miners market rates for the ore they produce.

We also need to ask miners themselves what they want, rather than assuming solutions without their input and expertise. Artisanal miners know why they mine, and have excellent ideas on what could improve their working and living conditions. We should ask them questions and listen to their answers.

What’s the future you’d like to see of artisanal and small scale mining?

The future I’d like to see is that we understand mining, both artisanal and industrial mining, in its full complexity. I think we need to know the role ASM plays in providing the backbone of survival for miners and their families.

I think we, as consumers, as tech companies, whoever has to rely on these minerals, need to be able to understand that a different kind of mining may be possible for ASM and for industrial mining. We need to acknowledge and appreciate the work that ASM miners do to enable our daily lives, and to enable decarbonization in the future. We need to bring ASM into discussions on social and environmental justice—not turn away in outrage or feign plausible deniability.

We need to try to understand the notion of justice beyond just the U.S. It’s not just the U.S. decarbonizing as an inherent moral good. We have to know that these supply chains are not only necessary for modern technology and the modern world, but they link us morally to one another. It’s easy to forget this, because it’s happening somewhere far away in a place we haven’t heard of and to populations of people that have been absolutely marginalized for hundreds of years. I don’t think the solution lies in us shaming each other as individuals: I think part of the solution probably also lies in holding political elites and major corporate actors’ feet to the fire.

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New ICC case studies provide guidance for trade digitalisation

• 3 September 2024

A new ICC Digital Standards Initiative collection of case studies aims to guide businesses and governments seeking to digitalise trade.

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The ICC Digital Standards Initiative has launched a report, featuring 22 case studies that illustrates how supply chain actors have successfully leveraged digital tools and interoperable global standards to address challenges in their supply chains.  

Case studies in the “Key Trade Documents and Data Elements on the Frontlines” report cover both private and public sector actions across four critical areas of digitalisation:  

• Shipping and logistics , focusing on electronic Bills of Lading (eBL) and other tools to reduce transaction times, enhance data integrity, and improve operational efficiency. 
• Commercial documents and product-related information , using technologies like blockchain and digital identity to increase transparency, reduce costs, and improve traceability and trust. 
• Cross-border regulatory compliance , featuring implementation of national single windows and streamlined customs procedures to enhance compliance and operational efficiency. 
• Financial services and fraud prevention , where innovations in trade finance, digital identity, and consent-based data sharing have increased security, speed, and accessibility, benefiting both financial institutions and small businesses. 

The case studies demonstrate that digitalisation can begin at any point in the supply chain, and be supported by off-the-shelf, proprietary, or a combination of internal and external resources. In addition to localised benefits, digitalisation also brings unexpected advantages, including increased employee engagement, customer loyalty, and innovation opportunities. They also show that a continuous, iterative approach with ongoing learning can maximise benefits over time. 

The case studies loosely build on the Key Trade Documents and Data Element (KTDDE) Framework, launched in April 2024, which proposes a unified approach to aligning data across key trade documents, to promote interoperability and data sharing.  

Pamela Mar, Managing Director of ICC DSI , said:

“Our goal is to motivate businesses to advance their digitalisation efforts by showcasing diverse paths to transformation. This report provides concrete examples that can widen the circles of action.” 

“This report is crucial as it provides actionable insights and real-world examples that can guide organisations through the complexities of digital transformation,” said Stephan Wolf, DSI Industry Advisory Board Chair , and Robert Beideman, DSI Industry Advisory Board Vice Chair.

“It moves us from strategic vision to practical implementation.” 

Raphaelle Hemmerlin, Chief Transformation Officer at SUCAFINA SA and a contributor to the report , added:

“Standardised data elements have streamlined our shipping processes, reduced email exchanges and processing times, and allowed us to focus on continuous improvement rather than administrative tasks.” 

To explore the key findings from the report and learn more about the KTDDE Framework, visit the ICC DSI website . 

Home / Resources / ISACA Journal / Issues / 2024 / Volume 5

All risk is enterprise risk.

IT risk can have enterprisewide impact, making it crucial to integrate risk management across business units.

Featured Articles

ISACA Journal Article

Data risk is enterprise risk: good data practices as risk controls.

There is no question that data risk equates to enterprise risk.

Adding Value With Risk-Based Information Security

Effective IT security management system design must start with top management and include the entire perimeter of the supply chain, with special attention paid to ensuring compliance with all relevant laws.

From Measurement to Management: Integrating Cyberrisk Quantification into Risk Governance

The inclusion of the governance domain was arguably the most notable addition to the NIST CSF 2.0.

Cybersecurity Risk Management Governance: An Agency Theory Perspective

An agency theory approach allows enterprises to have open dialogues and make informed cyberrisk management decisions.

Continuous Auditing and Risk Monitoring: Implementation With Credit Line Management

Credit line management presents unique complexities for auditors.

Building a Robust Third-Party Risk Management Program in a Connected Ecosystem

Third-party risk is an evolving problem characterized by steadily increasing complexities.

Case Study: Achieving Greater Financial Efficiency at ISACA

When it came time to upgrade their FMS, ISACA teams had to be carefully coordinated.

Information Security Matters: Cyber Impact Analysis

Whether it is a theft of data or an attack that renders systems inaccessible, cyberattacks are downright bad.

The Digital Trust Imperative: When Risk Becomes Reality

Once trust is lost, business is often lost as well. Therefore, organizations must look closely at digital trust.

IS Audit in Practice: Managing the Practical Risk Assessment

All risk is not the same. Industry dynamics, enterprise culture, and department risk tolerance all have enterprise impact.

New ISACA Releases

• Examining Authentication in the Deepfake Era
• Exploring Practical Considerations and Applications for Privacy Enhancing Technologies
• PCI DSS v4.0 Audit Program | Digital | English

Online Exclusives

Isaca journal, cpe quiz 216.

The University of Chicago The Law School

Abrams environmental law clinic—significant achievements for 2023-24, protecting our great lakes, rivers, and shorelines.

The Abrams Clinic represents Friends of the Chicago River and the Sierra Club in their efforts to hold Trump Tower in downtown Chicago accountable for withdrawing water illegally from the Chicago River. To cool the building, Trump Tower draws water at high volumes, similar to industrial factories or power plants, but Trump Tower operated for more than a decade without ever conducting the legally required studies to determine the impact of those operations on aquatic life or without installing sufficient equipment to protect aquatic life consistent with federal regulations. After the Clinic sent a notice of intent to sue Trump Tower, the State of Illinois filed its own case in the summer of 2018, and the Clinic moved successfully to intervene in that case. In 2023-24, motions practice and discovery continued. Working with co-counsel at Northwestern University’s Pritzker Law School’s Environmental Advocacy Center, the Clinic moved to amend its complaint to include Trump Tower’s systematic underreporting each month of the volume of water that it intakes from and discharges to the Chicago River. The Clinic and co-counsel addressed Trump Tower’s motion to dismiss some of our clients’ claims, and we filed a motion for summary judgment on our claim that Trump Tower has committed a public nuisance. We also worked closely with our expert, Dr. Peter Henderson, on a supplemental disclosure and on defending an additional deposition of him. In summer 2024, the Clinic is defending its motion for summary judgment and challenging Trump Tower’s own motion for summary judgment. The Clinic is also preparing for trial, which could take place as early as fall 2024.

Since 2016, the Abrams Clinic has worked with the Chicago chapter of the Surfrider Foundation to protect water quality along the Lake Michigan shoreline in northwest Indiana, where its members surf. In April 2017, the U. S. Steel plant in Portage, Indiana, spilled approximately 300 pounds of hexavalent chromium into Lake Michigan. In January 2018, the Abrams Clinic filed a suit on behalf of Surfrider against U. S. Steel, alleging multiple violations of U. S. Steel’s discharge permits; the City of Chicago filed suit shortly after. When the US government and the State of Indiana filed their own, separate case, the Clinic filed extensive comments on the proposed consent decree. In August 2021, the court entered a revised consent decree which included provisions advocated for by Surfrider and the City of Chicago, namely a water sampling project that alerts beachgoers as to Lake Michigan’s water quality conditions, better notifications in case of future spills, and improvements to U. S. Steel’s operations and maintenance plans. In the 2023-24 academic year, the Clinic successfully litigated its claims for attorneys’ fees as a substantially prevailing party. Significantly, the court’s order adopted the “Fitzpatrick matrix,” used by the US Attorney’s Office for the District of Columbia to determine appropriate hourly rates for civil litigants, endorsed Chicago legal market rates as the appropriate rates for complex environmental litigation in Northwest Indiana, and allowed for partially reconstructed time records. The Clinic’s work, which has received significant media attention, helped to spawn other litigation to address pollution by other industrial facilities in Northwest Indiana and other enforcement against U. S. Steel by the State of Indiana.

In Winter Quarter 2024, Clinic students worked closely with Dr. John Ikerd, an agricultural economist and emeritus professor at the University of Missouri, to file an amicus brief in Food & Water Watch v. U.S. Environmental Protection Agency . In that case pending before the Ninth Circuit, Food & Water Watch argues that US EPA is illegally allowing Concentrated Animal Feeding Operations, more commonly known as factory farms, to pollute waterways significantly more than is allowable under the Clean Water Act. In the brief for Dr. Ikerd and co-amici Austin Frerick, Crawford Stewardship Project, Family Farm Defenders, Farm Aid, Missouri Rural Crisis Center, National Family Farm Coalition, National Sustainable Agriculture Coalition, and Western Organization of Resource Councils, we argued that EPA’s refusal to regulate CAFOs effectively is an unwarranted application of “agricultural exceptionalism” to industrial agriculture and that EPA effectively distorts the animal production market by allowing CAFOs to externalize their pollution costs and diminishing the ability of family farms to compete. Attorneys for the litigants will argue the case in September 2024.

Energy and Climate

Energy justice.

The Abrams Clinic supported grassroots organizations advocating for energy justice in low-income communities and Black, Indigenous, and People of Color (BIPOC) communities in Michigan. With the Clinic’s representation, these organizations intervened in cases before the Michigan Public Service Commission (MPSC), which regulates investor-owned utilities. Students conducted discovery, drafted written testimony, cross-examined utility executives, participated in settlement discussions, and filed briefs for these projects. The Clinic’s representation has elevated the concerns of these community organizations and forced both the utilities and regulators to consider issues of equity to an unprecedented degree. This year, on behalf of Soulardarity (Highland Park, MI), We Want Green, Too (Detroit, MI), and Urban Core Collective (Grand Rapids, MI), Clinic students engaged in eight contested cases before the MPSC against DTE Electric, DTE Gas, and Consumers Energy, as well as provided support for our clients’ advocacy in other non-contested MPSC proceedings.

The Clinic started this past fall with wins in three cases. First, the Clinic’s clients settled with DTE Electric in its Integrated Resource Plan case. The settlement included an agreement to close the second dirtiest coal power plant in Michigan three years early, $30 million from DTE’s shareholders to assist low-income customers in paying their bills, and $8 million from DTE’s shareholders toward a community fund that assists low-income customers with installing energy efficiency improvements, renewable energy, and battery technology. Second, in DTE Electric’s 2023 request for a rate hike (a “rate case”), the Commission required DTE Electric to develop a more robust environmental justice analysis and rejected the Company’s second attempt to waive consumer protections through a proposed electric utility prepayment program with a questionable history of success during its pilot run. The final Commission order and the administrative law judge’s proposal for final decision cited the Clinic’s testimony and briefs. Third, in Consumers Electric’s 2023 rate case, the Commission rejected the Company’s request for a higher ratepayer-funded return on its investments and required the Company to create a process that will enable intervenors to obtain accurate GIS data. The Clinic intends to use this data to map the disparate impact of infrastructure investment in low-income and BIPOC communities.

In the winter, the Clinic filed public comments regarding DTE Electric and Consumers Energy’s “distribution grid plans” (DGP) as well as supported interventions in two additional cases: Consumers Energy’s voluntary green pricing (VGP) case and the Clinic’s first case against the gas utility DTE Gas. Beginning with the DGP comments, the Clinic first addressed Consumers’s 2023 Electric Distribution Infrastructure Investment Plan (EDIIP), which detailed current distribution system health and the utility’s approximately $7 billion capital project planning ($2 billion of which went unaccounted for in the EDIIP) over 2023–2028. The Clinic then commented on DTE Electric’s 2023 DGP, which outlined the utility’s opaque project prioritization and planned more than $9 billion in capital investments and associated maintenance over 2024–2028. The comments targeted four areas of deficiencies in both the EDIIP and DGP: (1) inadequate consideration of distributed energy resources (DERs) as providing grid reliability, resiliency, and energy transition benefits; (2) flawed environmental justice analysis, particularly with respect to the collection of performance metrics and the narrow implementation of the Michigan Environmental Justice Screen Tool; (3) inequitable investment patterns across census tracts, with emphasis on DTE Electric’s skewed prioritization for retaining its old circuits rather than upgrading those circuits; and (4) failing to engage with community feedback.

For the VGP case against Consumers, the Clinic supported the filing of both an initial brief and reply brief requesting that the Commission reject the Company’s flawed proposal for a “community solar” program. In a prior case, the Clinic advocated for the development of a community solar program that would provide low-income, BIPOC communities with access to clean energy. As a result of our efforts, the Commission approved a settlement agreement requiring the Company “to evaluate and provide a strawman recommendation on community solar in its Voluntary Green Pricing Program.” However, the Company’s subsequent proposal in its VGP case violated the Commission’s order because it (1) was not consistent with the applicable law, MCL 460.1061; (2) was not a true community solar program; (3) lacked essential details; (4) failed to compensate subscribers sufficiently; (5) included overpriced and inflexible subscriptions; (6) excessively limited capacity; and (7) failed to provide a clear pathway for certain participants to transition into other VGP programs. For these reasons, the Clinic argued that the Commission should reject the Company’s proposal.

In DTE Gas’s current rate case, the Clinic worked with four witnesses to develop testimony that would rebut DTE Gas’s request for a rate hike on its customers. The testimony advocated for a pathway to a just energy transition that avoids dumping the costs of stranded gas assets on the low-income and BIPOC communities that are likely to be the last to electrify. Instead, the testimony proposed that the gas and electric utilities undertake integrated planning that would prioritize electric infrastructure over gas infrastructure investment to ensure that DTE Gas does not over-invest in gas infrastructure that will be rendered obsolete in the coming decades. The Clinic also worked with one expert witness to develop an analysis of DTE Gas’s unaffordable bills and inequitable shutoff, deposit, and collections practices. Lastly, the Clinic offered testimony on behalf of and from community members who would be directly impacted by the Company’s rate hike and lack of affordable and quality service. Clinic students have spent the summer drafting an approximately one-hundred-page brief making these arguments formally. We expect the Commission’s decision this fall.

Finally, both DTE Electric and Consumers Energy have filed additional requests for rate increases after the conclusion of their respective rate cases filed in 2023. On behalf of our Clients, the Clinic has intervened in these cases, and clinic students have already reviewed thousands of pages of documents and started to develop arguments and strategies to protect low-income and BIPOC communities from the utility’s ceaseless efforts to increase the cost of energy.

Corporate Climate Greenwashing

The Abrams Environmental Law Clinic worked with a leading international nonprofit dedicated to using the law to protect the environment to research corporate climate greenwashing, focusing on consumer protection, green financing, and securities liability. Clinic students spent the year examining an innovative state law, drafted a fifty-page guide to the statute and relevant cases, and examined how the law would apply to a variety of potential cases. Students then presented their findings in a case study and oral presentation to members of ClientEarth, including the organization’s North American head and members of its European team. The project helped identify the strengths and weaknesses of potential new strategies for increasing corporate accountability in the fight against climate change.

Land Contamination, Lead, and Hazardous Waste

The Abrams Clinic continues to represent East Chicago, Indiana, residents who live or lived on or adjacent to the USS Lead Superfund site. This year, the Clinic worked closely with the East Chicago/Calumet Coalition Community Advisory Group (CAG) to advance the CAG’s advocacy beyond the Superfund site and the adjacent Dupont RCRA site. Through multiple forms of advocacy, the clinics challenged the poor performance and permit modification and renewal attempts of Tradebe Treatment and Recycling, LLC (Tradebe), a hazardous waste storage and recycling facility in the community. Clinic students sent letters to US EPA and Indiana Department of Environmental Management officials about how IDEM has failed to assess meaningful penalties against Tradebe for repeated violations of the law and how IDEM has allowed Tradebe to continue to threaten public and worker health and safety by not improving its operations. Students also drafted substantial comments for the CAG on the US EPA’s Lead and Copper Rule improvements, the Suppliers’ Park proposed cleanup, and Sims Metal’s proposed air permit revisions. The Clinic has also continued working with the CAG, environmental experts, and regulators since US EPA awarded $200,000 to the CAG for community air monitoring. The Clinic and its clients also joined comments drafted by other environmental organizations about poor operations and loose regulatory oversight of several industrial facilities in the area.

Endangered Species

The Abrams Clinic represented the Center for Biological Diversity (CBD) and the Hoosier Environmental Council (HEC) in litigation regarding the US Fish and Wildlife Service’s (Service) failure to list the Kirtland’s snake as threatened or endangered under the Endangered Species Act. The Kirtland’s snake is a small, secretive, non-venomous snake historically located across the Midwest and the Ohio River Valley. Development and climate change have undermined large portions of the snake’s habitat, and populations are declining. Accordingly, the Clinic sued the Service in the US District Court for the District of Columbia last summer over the Service’s denial of CBD’s request to have the Kirtland’s snake protected. This spring, the Clinic was able to reach a settlement with the Service that requires the Service to reconsider its listing decision for the Kirtland’s snake and to pay attorney fees.

The Clinic also represented CBD in preparation for litigation regarding the Service’s failure to list another species as threatened or endangered. Threats from land development and climate change have devastated this species as well, and the species has already been extirpated from two of the sixteen US states in its range. As such, the Clinic worked this winter and spring to prepare a notice of intent (NOI) to sue the Service. The Team poured over hundreds of FOIA documents and dug into the Service’s supporting documentation to create strong arguments against the Service in the imminent litigation. The Clinic will send the NOI and file a complaint in the next few months.

Students and Faculty

Twenty-four law school students from the classes of 2024 and 2025 participated in the Clinic, performing complex legal research, reviewing documents obtained through discovery, drafting legal research memos and briefs, conferring with clients, conducting cross-examination, participating in settlement conferences, and arguing motions. Students secured nine clerkships, five were heading to private practice after graduation, and two are pursuing public interest work. Sam Heppell joined the Clinic from civil rights private practice, bringing the Clinic to its full complement of three attorneys.