Thu | 08.09.2016
Meet Roxana Horvat, a young and energetic entrepreneur leading Straetus Bucharest, a branch of the well-known Dutch international debt collection agency, organized in franchise system.
1. Dear Roxana, please introduce yourself shortly to our members.
Hi, my name is Roxana Horvat and I like debts :) other than mine, of course :) Well, for over 10 years I have been working in debt collection industry. During all these years, I've learned and deepened this domain in banks and collection agencies, as collection officer, collection coordinator and sales manager, selling debt collection services. Now I am the owner of Straetus Bucharest. Straetus is an international debt collection agency, organized in franchise system, with more than 50 offices in Romania, Netherlands, Germany, Austria, Belgium, Poland, Russia, USA, Israel, England. The transition to entrepreneurship is a dream come true. My priority now is to develop this business and to increase notoriety of Straetus in Bucharest.
2. Why the Netherlands, why Straetus and why entrepreneurship?
Netherlands because Straetus and vice versa. Entrepreneurship because life in three happened. I wouldn't exaggerate to say that Straetus found me, or, that we have found each other just in the moment when I wanted to get out of corporate environment. Straetus formula is service oriented drawn. From my point of view this is the only way to build long-term relationships with customers and that fits very well with me. I knew I was the perfect match for this business formula. Straetus also offers all possibilities to settle in accounts receivable efficient for businesses. Companies can lower costs to keep their cash flow and invest high at times when it is really needed.
3. You have over 10 years of experience in the collection field. How has the local market evolved in this period and what can you foresee?
The evolution in debt collection field is fluctuating. For concrete data, I will refer to the reports published by AMCC, the most important debt collection association in Romania, which show periods of market growth followed by intervals of decrease within the sector. In this context, the debt collection market has registered a 12% yearly decrease in terms of debt referred during 2011-2014. In spite of that decreasing trend in terms of value between 2011 and 2014, domestic debt referred has registered an increase of 11% in 2015 compared to 2014. This increase was mainly due to a 74% increase of value of debt referred B2B cumulated with an increase of 4% in B2C debt referred in 2015 compared to 2014. As for the number of domestic referred cases, remained constant throughout 2015, while revolving around 2,3-2.4 mill cases per semester. Lately, more players from major industries, in order to improve debt collection and generate more revenue, started to partner with debt management companies that offer specific solutions for this issues. From my point of view this is encouraging for us, because it means awareness of the advantages a debt collection agency can bring to their business.
4. What are the most common mistakes companies do when in terms of credit management?
The business fails when risk management is not under the spotlight, when business owners aren’t being proactive about collecting payments from their clients. From my experience, a bad payer in particular becomes even worse payer. If the companies don't draw-up policies and don't adjust the organization, cash flow is not under control. Internal credit policies should always include: payment conditions, risk management principles, acceptance criteria for new customers, maximum payment term, credit control and collection principles.
To have a clear view, let's take as example the company ABC that sales on credit to its clients 10,000,000 Ron per year and they collect the money in 90 days from invoicing. At the same time the company has to pay for a bank loan for working capital an interest of 5% per year. Reducing the DSO period (number of days it takes to a company to collect its account receivables) with only 10 days, results a saving of 13,698.95 Ron for the company.
[ (Total receivables x Interest) / 365 days ] x DSO(days sale outstanding)
[ (10,000,000 x 5%) / 365 ] x 90 = 123,288 Ron interest paid for 90 days of credit offered to its clients
IF the company reduces the collection period only with 10 days: [ (10,000,000 x 5%) / 365 ] x 80 = 109,589,05 Ron interest paid for 80 days of credit offered to its clients
In conclusion, one of the biggest mistakes is not reducing the DSO (days sale outstanding). A DSO> 45 days puts the business in imminent danger.
5. Going further to the debt collecting phase – what are here the most frequent mistakes, preconceptions and obstacles?
Most frequent mistakes are: 1. time dedicated to debt collection instead of focusing on the business sales and business development and 2. not requesting professional help in time or at all. When we present ourselves as debt collection specialists, people think directly to legal proceedings, lawyers and bailiffs. In reality, amicable collection is our main focus and it can be done in a considerate and professional way, reducing considerably the percentage of cases that pass to legal proceedings. Prevention is better and cheaper than curing. That is why we recommend outsourcing debt collection starting with 45 days past due, the success rate probability being close to 80%, according to several studies in the domain.
6. When should a company outsource the collection activity and what are the advantages and disadvantages of outsourcing such a service?
The sooner the better! We recommend starting with 45 days past due. It's the minimum cost and the highest probability of success rate. Any company should reduce the receivables recovery period so that the cash flow becomes healthier.
Of course it is very good and healthy for the business to have in-house people that take care of receivables, but, in most of the cases they fail. They fail because, let’s face it, no one likes to be the bill collector. Generally, the job gets pushed off onto people who do not have the skills to perform it well, such as the secretary or a sales guy. And when these most of the times unprepared, frustrated employees have exhausted all the collection efforts and there is no success, it is highly advisable to seek the help of specialized debt collection agencies.
One of the biggest advantage of outsourcing is that it helps to put the focus back on the core functions of the business and such, by increasing productivity and efficiency of the employees, to be better-prepared for market challenges and have a streamlined cash flow. Also, let's not forget the advantage of paying only at success when outsourcing, compared to paying a monthly salary to an employee.
On the other hand, some potential disadvantages of outsourcing include poor quality control, loss of confidentiality and sensitive data and a loss of strategic alignment. But all of these concerns can be addressed and minimized by carefully choosing the right provider. Isn’t it? Even if outsourcing debt collection services has its share of advantages and disadvantages, the benefits of outsourcing services exceed by far the disadvantages.
7. Romania vs The Netherlands: how is the collection service perceived? Do you feel that here you are somehow educating your clients?
It’s not a surprise that companies from The Netherlands perform better both commercially and on the financial side, compared to the ones from Romania. The experience as traders, well settled institutions and stable economy has also imposed a certain education regarding dealing with unpaid debts. Commercial relationships are set on concrete bases and companies are educated in such way that they know that in most cases, letting a specialist deal with a certain issue gives better results rather than dealing with the problems by themselves.
As an overview, the paying behavior of Dutch domestic companies is excellent and payments normally take place within 46 days (2015 figures), or following delivery. In our country, although the regulations on late payments are more demanding than EU rules on the matter, the average DSO was round 65 days. In practice, payment should occur within 30 to 40 days following the invoice remittance, but delays of up to 25 days may be expected.
From what we have noticed, in Romania, most small entrepreneurs consider that they can take care of all the aspects of the business by themselves. It is remarked a willing to control and not to let information from within the company reach external sources. Most of them agree that collection is difficult, however, they are not aware of the benefits of imposing better debtor monitoring can bring for the cash-flow of the company. Not to mention that debt collection is performed by non-specialized staff, such as the secretary or the sales people, usually with low results. This is the moment for us to intervene and educate the market players, if we can call it like that. We concentrate on these aspects when we first approach a customer in Romania and try to explain the options they have to improve the collection.
If our clients know exactly what our services consist of, their expectations of what we will deliver are realistic. To build long-term relationships, we have to take time to educate our customers about our services and not rushing them into buying. Keeping good working relationship with clients truly pays off in the long run.
8. In the end, please a thought for NRCC members!
My purpose of passing from paid employment to working as an independent contractor was to offer my partners a service that helps their business get to the next level. If for companies with big volumes of receivables there were alternatives, for smaller volumes, small and medium size companies, there was not such professional alternative. Straetus can do both. Based on the long experience that was gained in Netherlands and the other international franchise offices, I know we can offer a service that people believe in and, in general, we commit to things we believe in. So, I invite NRCC members to try knowing us and our services, because we can make the difference. If I hadn't identified this niche and I hadn't trust Straetus platform, meaning the software, international experience and team, for sure I would have chosen something else, other business, other employer maybe.