If you're still using alphabetical order, it's time to ditch that... Even if you don't have more than one person responsible for collections at your firm, the way in which you divide up and tackle that job is strategically a very important question for your credit department.

One of the easiest - and traditionally more popular - ways has been to divide things up based on the alphabetical order of your customer base. But our studies have shown that that's one of the least effective ways to get the job done. The reason? There's nothing strategically significant about the first letter of your customer!

In Credit Today's recent benchmarking study on collection automation, we examined how credit departments are assigning responsibility for collections.

Most (nearly half) determine collection coverage based on sales territory, distribution channel or geography. One advantage of organizing collections based on geography is that collections become aligned with sales this way.

Geographic Coverage: Better, But Not the Best

Although geographical coverage offers the advantage of aligning with sales, it's still probably not the most effective way to divide up your collection workload.

We think you can learn quite a bit from the 41 percent of our survey respondents who base their collection assignments on account type (customer characteristics such as industry, risk or size), collection stage (over 30 days, 60 days, etc.) or some combination of the two.

It is interesting to note that no respondent claiming to use one of these collection coverage schemes, all of which require a higher level of sophistication than alphabetical or sales/geographical coverages, reported falling far short of their collection goals.

Thankfully, only 13 percent reported dividing collection coverage alphabetically, a method which offers little strategic or tactical benefits.

In fact, when we examine the relationship between collection coverage strategies and collection performance, these same three sophisticated account assignment methodologies all do fairly well on the question of whether or not they are meeting or exceeding their collection goals.

Those dividing up their workload based on the alphabet, on the other hand, on average, fell well below the norm. Interestingly this was not for a lack of firms exceeding goals, but instead of too few meeting their targets - apparently something of an all-or-nothing situation.

So the moral of the story this week is that it's extremely important that you consider strategic factors when prioritizing and dividing up your collection workload - and the first letter of a customer's name is NOT a good strategic factor.