By Nick Cherry, Divisional CEO, Ardent Credit Services and Phillips & Cohen Associates
When I started my career in collections more than 30 years ago, success was measured by one thing: dollars recovered. Collections were largely viewed as an operational function that existed after the customer relationship had effectively ended.
Today, through my work with organizations across North America, including our recent expansion into Canada, I’ve seen businesses on both sides of the border grappling with many of the same challenges: rising consumer financial pressure, changing customer expectations, and higher costs to acquire and retain customers.
In this environment, it’s not enough to think about collections solely as a way to recover revenue. Businesses also have to consider what happens to the customer relationship after a payment is missed.
As much as times have changed, one thing remains the same: how a business treats a customer when times are tough can be just as important as how it serves them on brighter days.
A missed payment doesn’t tell the whole story
One of the biggest misconceptions I’ve seen throughout my career is the assumption that customers who fall behind simply made poor financial decisions.
Sometimes that’s true. More often, it isn’t.
In my experience, financial hardship is almost always triggered by life events. Job loss, illness, divorce, unexpected expenses, or broader economic conditions can drastically change someone’s ability to pay overnight.
We’re also seeing financial pressure affect a wider range of consumers than it once did. More people are relying on credit to cover everyday expenses, savings have become thinner, and financial resilience has declined.
For businesses, that’s an important distinction.
A customer who misses a payment today may have been a loyal customer for years beforehand, and may very well become one again once their circumstances improve.
Treating every delinquent account the same risks overlooking long-term customer value for short-term recovery.
Collections has become part of the customer experience
One of the biggest changes I’ve witnessed over my career is the realization that collections don’t exist outside the customer journey. They are part of it.
For most businesses, customer acquisition is only half the battle, but it’s often one of the largest investments they make. Significant time and money is spent refining marketing strategies, improving customer service, and measuring lifetime value to make the most of every customer relationship.
But when one of those customers misses a payment, that mindset often changes. Many unintentionally undermine those investments with rigid processes and poor communication. Businesses have a lot more to lose when they treat every missed payment as the end of a customer relationship.
Customers don’t separate these poor experiences from the rest of your business. To them, the collections experience is simply another reflection of your company and its values. They remember how they were treated when they needed help just as much as they remember the quality of your product or service.
That’s why I believe collections should no longer be viewed solely as a recovery function. Done well, it can strengthen customer relationships and reinforce the trust businesses have worked hard to earn.
Recovering revenue is certainly important, but if you lose trust, customer relationships, and your reputation in the process, the long-term cost can far outweigh the dollars you recover.
When it’s expensive to win customers, it becomes more important not to lose the ones you already have, even if they’re experiencing temporary financial hardship.
Earlier conversations lead to better outcomes
If there’s one lesson I’ve learned over the years, it’s that waiting rarely improves the situation.
Businesses often don’t engage meaningfully until an account has already become seriously delinquent. By that point, options are more limited for both the customer and the business.
Earlier communication creates better opportunities to understand what’s happening and find practical solutions before financial challenges become much harder to resolve.
More businesses are employing data and analytics, increasingly AI driven to determine who, when & how to contact customers to achieve the best outcomes. Encouraging customers to reach out early, providing multiple communication channels, and focusing on self-service solutions can make a meaningful difference.
That doesn’t mean businesses should lower standards or ignore financial risk.
It means that recovery and customer relationships don’t have to be competing priorities. The most successful organizations understand that respectful & empathetic communication, payment flexibility when necessary, and proactive engagement can support both.
The bottom line
While overdue accounts are an inevitable part of doing business, they don’t have to mark the end of a customer relationship.
Companies spend years earning customer trust. The businesses that continue to earn that trust, even during difficult conversations, won’t just recover what’s owed. They’ll preserve something even more valuable: the opportunity to keep a customer for the long haul.
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Disclaimer: This article is based on publicly available information intended only for informational purposes. CanadianSME Small Business Magazine does not endorse or guarantee any products or services mentioned. Readers are advised to conduct their research and due diligence before making business decisions.
