Don't get the wrong idea about Robert Tharnish.
Just because he served as a prisoner-of-war interrogator for the U.S. Army in the mid 1970s doesn't mean that he uses the methods he learned from the military intelligence unit in his role as a debt-collection specialist.
Even in an era when a growing number of businesses are paying more attention to account receivables, the vice president of collection services for the ABC Companies Inc. (American Bureau of Collections) said strong-arm tactics are shunned by the Buffalo-based agency.
"We try to use the iron hand with a velvet glove. We're firm, but we're non-confrontational and professional. Our goal is to try to maintain a relationship between the debtor and our clients," he said.
Founded in Buffalo 69 years ago, ABC has seen a significant increase in the number of smaller businesses turning to collection agencies.
And for good reasons. With business and personal bankruptcies hitting all-time highs, some credit managers are more jittery these days as past due accounts move beyond 60 days. The "loosening" of credit terms by many companies that are striving to grow their client base is another factor.
Also, with Internet marketing enabling even small firms to venture into wider sales arenas, the demand for collections expertise is likely to continue growing.
It's easy for businesses to face a cash-flow crunch. Susan McCartney, director of the Small Business Development Center at Buffalo State College, said sometimes the most visionary entrepreneurs end up being the worst debt collectors.
"Many entrepreneurs just don't pay attention to cash flow. Their excitement comes in developing products or services and making sales. Getting money from customers is a boring detail."
That is, until delinquent accounts begin to eat away at the bottom line.
Mills Welding Supply Inc., a distributor with locations in Buffalo, Niagara Falls and Hamburg, hired ABC to collect some debts, even though delinquent accounts are not viewed as a significant problem for the 80 year-old company.
Controller Stephen A. Lisicki said less than 1 percent of all accounts go to a collection agency, the second-to-last step before court action.
"Cash is the lifeblood of any company. Without cash, you're forced to go to a bank and pay interest to borrow money. So we try to be proactive in debt collection, while still maintaining strong relationships with our customers."
Lisicki, who has worked in various financial capacities for a number of companies, said collection agencies typically work on a contingency fee basis, charging between 10 percent and 33 percent of the debt collected.
But Ms. McCartney said when some companies turn to collection agencies for help, it's often a sign that managers have waited too long to address the problem.
"You need to be on top of it right from the start. You need to set up an effective system for collecting your receivables," she said.
Experts suggest the following strategies:
Keep close tabs on invoices. Sometimes the biggest impediment to collecting debt is haphazard billing records and inefficient invoicing systems. Some experts urge even the smallest mom-and-pop firms to invest in computerized tracking systems.
Pinpoint internal problems. If customers are late in paying their bills, is it possible that they're disgruntled with a product or service?
"You have to look in the mirror. I can't tell you how many businesses think they have a collection problem when they really have a sales problem," Tharnish said.
Give cash incentives for early payment. Offer a small price break if they send a check by a certain deadline.
Consider "outsourcing" the collections function to experts.
Sheldon H. Weaver, a Bowmansville business consultant who has helped many entities collect bad debts, said sometimes it just takes intervention from an outside entity to get payment.
"We've been able to settle about 20 to 30 percent with just a letter or phone call. About half are settled in court. But you'll probably never get payment for 15 percent of the delinquent accounts," he said.
Deadbeats cost everyone money. The American Collectors Association estimates that bad debt costs every man, woman and child in the United States $375 each year by driving up the costs of goods and services.
Tharnish, a 20-year veteran in the debt-collection arena, concedes that the interrogation tactics he learned in the Army have probably enhanced his effectiveness.
His military skills also come in handy at home.
"My wife was also a prisoner-of-war interrogator. That's how we met. Our five kids don't get away with anything," he chuckled.