Mike Ginsberg?s Blog: February was a Month for the Record Books in ARM

Records were shattered by many collection agencies in the month of February.  After a comparatively light recovery month in January, many agencies are coming off their best monthly performance ever in February.  Not just by a month-over-month comparison.  Not by a same month, year-over-year comparison. Best month ever recordered.  March is also shaping up well.

I should point out that record performances are being achieved by small, mid-size, and large players alike across most consumer market segments including telecom, bank card/credit card, and healthcare.  I am not saying that everyone is shattering records but many are.  Dare I say, most agencies had a rock solid February.   What about you?

The big questions being raised are: Why? and Is this performance sustainable?  First, let’s address the why.

Not surprisingly, because of the impact of tax rebates, February is typically a very strong performance month.  We all know that the collection industry is impacted by seasonality and that first quarter is typically the strongest quarter of the year thanks to Uncle Sam rebates.  However, we have found that tax season came late this year for quite a few agencies. It was slowed by the harsh winter that hit many parts of the Northeast and mid-Atlantic regions, causing consumers to file later than usual and State and Federal Government agencies to close down for days at a time.  On top of this, account volumes being placed with third party collection agencies are arguably at their highest levels ever.  This is because of the dramatic impact of the recession on past due receivables and the propensity among credit grantors to place instead of sell accounts due to soft prices and financing constraints in the debt buying market.  The final factor involves economic indicators that most impact recoveries.  National unemployment rates appear to be leveling off at 9.7 percent and consumer confidence levels are tracking upward, which are both contributing to the production of positive results.  

Is February‘s performance sustainable?  I think the answer is yes in the long run, but certainly not at the record levels that many agencies achieved.  Most of us in the industry believe that placement levels will be high for the foreseeable future.  Collectability should continue to improve as the economy recovers from the worst recession ever.   Job creation has become the number one priority of the current administration and indications are positive that the unemployment rate has leveled off.   Managers have also cut away the fat of their operations to better position themselves for bottom-line improvement and they are starting to see the benefits of their efforts.  

One month’s stellar performance does not mean that we are out of the woods just yet.  Not even close.  However, a record month for many is worth acknowledging.  Now back to work everybody and keep up the strong performance. 

Mike Ginsberg is the leading M&A expert for the accounts receivable management industry. He leads a premier advisory team that helps ARM industry owners and executives succeed in their growth, exit, and M&A strategies. Check out his page on insideARM.