The accounts receivable management (ARM) industry in the U.S. was recently valued at $17.9 billion¹, but how will recent market forces influence the market in 2023? The National List of Attorneys (The NL) has identified multiple trends from this year that will affect the financial outcomes of legal collections going forward. Some of the most pertinent include the following:
· The Fed has steadily increased U.S. interest rates to the highest point in 15 years to combat rising inflation, with cascading effects through the credit and lending industry as well as costs through supply chains.
· The Consumer Financial Protection Bureau (CFPB) updated Regulation F in November 2021, with a resulting industry initiative in 2022 for collectors to track omnichannel communications forB2B as well as B2C interactions.
· The labor market continues to be tight for employers, with unemployment at 3.7% as of October 2022. Furthermore employee turnover reached a new high as 4.5 million workers quit their jobs in November.² Having enough experienced talent on staff to get the job done isn’t something collectors can take for granted.
What does this mean for you? We examine below how these factors are poised to impact the ARM industry in 2023.
Willingness to Pay Will Diminish
With inflation driving up costs and higher interest rates constricting credit, customers are becoming increasingly conservative with cashflow. They’re scrutinizing even the smallest expenditures, and will be more financially motivated than ever to contest charges, delay payment, or even consider bankruptcy in earlier time frames than we’ve seen in a while.
This means you must act more quickly and efficiently to achieve the same collection results as before. Continuing to hold on to stubborn collectibles without engaging an attorney in the process could lead to a decrease in overall results. When initial efforts don’t quickly prove successful, placing a claim with qualified attorneys that litigate collection matters on a contingency fee ensures the best chances of financial outcomes while minimizing your up-front costs.
Omnichannel Tracking Will Improve Litigation Results
The term “omnichannel” simply means coordinating all communication with customers across all channels—postal mail, email, phone, text, social media, etc.—and tracking it in such a way that the communication records are integrated into a single view to provide context to the entire conversation. With Regulation F requiring limits on the number of times a third-party collector can contact a customer, the need to document and review all communications with that customer becomes even more important. This means more than ever that every interaction is vital to your success on collecting what you’re fairly due.
Furthermore, the documentation of these omnichannel communications as required by Regulation F provides additional support for when a claim needs to be handled by a collection attorney. The more information and evidence available, the stronger the case will be, so the disciplines involved in Regulation F compliance will in the end support improved financial outcomes of litigation.
Staffing Shortages Will Drive Outsourced Services
High turnover and low unemployment are causing staffing shortages that slow down operations for businesses across the country. Within the ARM industry, understaffing can contribute to a backlog that shows up on account aging reports and liquidation rates with a growing number of accounts that need to be collected just as staff to work those collection matters become harder to find and retain.
This will cause businesses with collection matters to increase their use of outsourced services to fulfill their needs. By outsourcing backlogged claims to collection attorneys, clients will increase their chances of liquidation compared to claims that are simply waiting in queue to be handled by vacant positions or overloaded in-house staff. Furthermore, a professional outsourced project management service like NL Advantage can help clients smooth out volume spikes and backlog queues, all on a pay-for-performance basis that eliminates recruiting, training, payroll, and overhead expenses.
This article describes a few of the most important ongoing factors we see challenging the ARM industry in 2023. Trying to handle your portfolio of collection accounts next year with a status quo approach when so much is changing could end up severely reducing your ability to monetize what’s legally due. It’s more essential than ever to engage a collection attorney well before a claim becomes uncollectable. If you find yourself strapped for time or support, don’t forget working with an attorney backed by The NL’s gives you access to an extra level of service and support from friendly and experienced NL staff that goes well beyond simple legal referrals. Get ahead of the game and contact The NL to learn more about how we can help you succeed with your collection strategy into 2023 and beyond.
What’s trending most for you within this article leading into 2023? Join the discussion in the NL Community Forum on LinkedIn and let us know!
About The National List of Attorneys
The NL is the premier B2B legal networking hub where contingency-fee attorneys connect with the business clients who need their help to get paid what they’re fairly due. We use claim performance data to optimize legal referrals, advance the legal industry’s use of technology, and develop tailored client-focused strategies to maximize financial outcomes of legal claims.
¹ IBIS World, Debt Collection Agencies in the US, IBIS 2022
² U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Summary, BLS 2022