PRESS RELEASE: Ongoing Credit Crisis Produces Record-Breaking Accounts Receivables Crunch -
December 2, 2008
Vengroff, Williams and Associates, Inc. Sees 30 Percent Increase in Third Party Collections in Past Two Months PRESS RELEASE: Garden Grove, Calif. -- December 2, 2008 -- Vengroff, Williams & Associates, Inc., a leading provider of receivables management and business process outsourcing solutions, announced today a hefty growth in both its core business and third-party collections. As the ongoing global financial crisis continues to limit access to credit, debt-related accounts receivables covenants are driving an unprecedented increased focus on cash flow. Following the last downturn in the financial markets earlier in this decade, after Enron imploded and internal-control reports became mandatory, controllers became CFOs' best friends. Yet, with liquidity now the watchword of the day, treasurers are the ones crowding into the finance chiefs' offices. With the current turmoil in the banking industry, Vengroff, Williams and Associates is reporting significant uptick in demand for its services as related to outsourcing and third party collections, most notably in the following industry segments:
- Commercial (business to business)
- Retail (credit card, auto loans, etc.)
- Medical (patient liability , insurance, medical devices)
A proven market leader in for 45 years, VWA is among the elite of US-based outsourcers within the finance and accounting BPO (business process outsourcing) industry with more than 3,000 global clients. Specializing in delivering custom-tailored, specialized solutions to increase customers' efficiency and provide the resources necessary to improve cash flow management, VWA's Robert Sherman, president of the firm's California division, said, "The Golden Rule for any sustainable success story is disciplined, focused action in four areas - in good times and in bad times: Revenue Growth, Cost Control, Enhancement of Profit and Increases in Cash Flow. If you are a fast tracker on receivables, you will be one of the 30-40% looking for collections in a timely, aggressive manner. End results, you win the temporary cash flow game necessary in today's marketplace." In a contracting economy, receivables become a prime concern for many companies, as they stumble on roadblocks when it comes to reconciling their outstanding accounts. And when that happens, keeping a close eye on cash takes center stage. Working capital is squeezed at both ends as the business looks to negotiate better terms with suppliers, and at the same time guard against inevitable customer defaults. According to Sherman, VWA has seen a 32% increase in new business this year as compared to this time last year. More than 30% of VWA's new client acquisition through September 30, 2008 is related to third party collection contracts. Since the credit-crisis began to hit its crescendo in mid-September, CFOs at companies of all sizes, most significantly within the mid-market segment, have been paying ever closer attention to the cash streaming through their businesses and keeping careful watch on their suppliers' credit terms and their customers' viability. No one wants to see the current credit freeze among wary banks repeated between customers and vendors. Also to be avoided: getting caught in a tug-of-war between accounts receivable and payable. For instance, two of VWA's clients, Rieck Services, a 117-year old manufacturer of heating, ventilation and air conditioning systems based in Dayton, Ohio, was able to collect on 50 percent of outstanding receivables in three months utilizing VWA's A/R outsourcing services, while the Inventure Group, a major marketer and manufacturer of specialty food brands based in Minneapolis, Minnesota, realized a 35 percent reduction in aging receivables over the past 12 months. According to Irma Moreno, credit manager at a construction supply company in business for over half a century and with five major service centers located throughout California, Arizona and Nevada, said "Over the past six months, we have been keenly aware that in light of the unstable economic climate, we have been assigning past due accounts to VWA far more frequently, with aging receivables dated 90 days past due, as opposed to the usual 120 days. We have been working in partnership with VWA for three years and they are an excellent third party collection outsource provider for us. On the average, we receive approximately an 80% return on the receivables assigned to VWA." CFOs and credit managers have reason to be concerned, since their customers could withhold payments from their companies. Although the results aren't conclusive yet, 10 percent of companies delayed payments to their vendors in September, in response to the crisis, according to a survey of 366 treasurers and CFOs by the Association for Financial Professionals. The report, done in late September, said that 18 percent would continue to be late in paying their bills if the credit crunch didn't abate. VWA expects to see companies, most notably mid-size companies with annual revenues between $500M and $750M, to be faced with customers who will use the credit crisis and the fear of recession as reasons to hold onto cash and postpone payments. "In general, it's common for companies to look for ways to stretch their payables during a downturn as well as to try and obtain more favorable terms, says Sherman. "But for smaller companies that push-pull can be a big challenge.
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