Commercial Collection & Receivables in the Turnaround World
The Good, The Bad, and The Ugly
Written by Jeff Fluty, Vice President Business Development, Brown & Joseph, Ltd. February 20, 2014.
As a commercial collection and receivables partner to hundreds of clients for the past 18 years, Brown & Joseph is fortunate to have experience in various industries. Some of these overlap from time to time and we have clients who belong to multiple industry or trade groups. In many of these associations, we are members ourselves. One such association is the Turnaround Management Association (TMA). The TMA is an association with, perhaps, the greatest diversity and scope of project opportunities.
Founded in 1988, the TMA is an international, non-profit association dedicated to corporate renewal and turnaround management*. With a membership made up of consultants, advisors, attorneys, lenders, and service providers, the TMA is definitely a capable resource for professionals involved in any variation of M&A work, Wind Downs, Turnarounds, Corporate Expansion/Reduction, Tax Advisory, or Business planning & strategy. In many of these scenarios, the servicing or liquidation of receivables must be addressed.
So, how does a commercial collection partner like Brown & Joseph fit into the equation?
Corporate growth and expansion are undeniably good things. The role of a consultant in dealing with a distressed company can be similar to triage. However, a company in “growth mode” often needs someone to grab the steering wheel because the gas pedal is on the floor. Whether through acquisition or organic expansion, collection consistency can suffer. In acquisitions, the blending of different management policies and culture means that standardization is the first step.
The TMA professionals for which we work with will often have us review closed out receivables to ensure due diligence was taken. In doing so, previously lost revenue can be uncovered and realized. In rapid growth scenarios, limited accounting staff may be forced to do more with inadequate resources. This is a perfect opportunity to adjust collection timelines and have Brown & Joseph intercede sooner in the process. The result can be internal staff spending more time on growing customers rather than delinquent ones. Ultimately, our goal in working with TMA professionals who are involved with healthy organizations is to increase the value they bring to their client.
While the last few years have seen a decrease in the number of businesses failing, it has by no means stopped. Nor will it. Industries hardest hit, recently, include real estate, financial services, and industrial/distribution. Turnaround professionals often play numerous roles in the wind down of these organizations. When working as liaisons between the court and creditors, the timelines are always tight and unnecessarily leaving money on the table is not tolerated.
As a collection partner, Brown & Joseph is often contacted when a receivables portfolio is involved. Historically, the goal is to clean it up and sell it as quickly as possible. Lately, we’ve found greater success in working with our partners and creditors in a third party, contingency collection role. Unlike the past, it need not drag out timelines. The use of attorney driven collection efforts, as well as the state of the art scrubbing and research means we can offer a 30, 60, or 90 day stop gap alternative to outright sale. Even better, at the end of the designated timeframe, the portfolio is cleaner and potentially more marketable for sale. In a wind down situation, our marching orders are always maximum recovery in minimum time.
In the past, “true” turnarounds were more plentiful. That’s the word coming from many of the TMA professionals with which we deal. That said, the frequency of private equity firms cleaning up distressed acquisitions seems to be on the rise. Through our Clean Slate program, we can be involved in the early stages to identify troubled receivables. For some clients, this means reviewing receivables portfolios pre-transaction for viability. Regardless of when we’re brought in, Brown & Joseph can offer options to immediately affect a portfolio company’s revenue streams. Some CTP’s serving in an interim management role have found that our services are near plug and play when looking at short, medium, and long term business strategy. The contingency nature of our fee structure means we create no additional burden on distressed companies which is quite the contrary.
For additional information about Brown & Joseph’s suite of services for TMA professionals, visit www.brownandjoseph.com or contact us today at (847) 621-6123.