You really want to drive me crazy? Let’s talk about industry conferences. Splashy stages. Vendor superlatives. Cutting-edge AI software revolutionizing collections. Replacing humans. Interpreting consumer preferences. Finding frictionless opportunities to pay debts people only wish would go away. All fascinating. Much of it important.

I once recommended forming an interest group within one of the industry advocacy organizations around a different part of the collection process.

Crickets.

What was my dull, drab seminar topic? The “back office.”

Back office? Now there’s an indictment.

We plan. We scheme. We text. We entice. We negotiate. We empathize. We build frictionless portals. Get the money. Earn the fee. Touchdown!

Except it isn’t.

Getting the money in the door is only half the job an intermediary is being paid to deliver.

Deliver? Oh, that’s right. The client is paying you your revenue when they receive the cash you promised. Not when you announce that you coaxed it from the reluctant consumer.

Aren’t those the same points in time?

If that’s your question, I’ll meet you at the bar at the next industry conference. We have a lot to talk about.

Because those last 20 yards can get surprisingly complicated.

First, the consumer wants to pay.

The frictionless gurus have this part covered, mostly. Let’s put aside those dinosaur customers who still actually mail in checks. Put a scanner in the back office. Cash? God forbid. Back office handles those edge cases. No ROI there.

Electronic? Now you’re talking. ACH. Debit card. Maybe credit card—unless you’re collecting for the same bank issuing the credit. Banks figured out long ago that using new debt to pay old debt to the same lender might not be such a great idea.

Then come the newer methods. Apple Pay. Google Pay. Venmo. More frictionless? Less friction? I always get tangled in that double negative.

And the flashy payment platforms are moving in too, although some still seem to be deciding exactly how enthusiastically they want the debt collection industry in their ecosystem.

But I diverge. The point is that the celebrated customer-facing encounter doesn’t end the process. It begins the next one.

The consumer provides a form of payment. Now the back office kicks in.

Route that dollar to a payment processor. The processor routes it through a banking network. Eventually—perhaps several days later—that dollar settles into a trust account established for the client.

Want it sooner? Sure. Pay the processor more and get accelerated funding. But think about what just happened. You paid someone so you could see the money sooner. Economically, you have introduced financing into what everyone likes to describe as a simple collection transaction.

And that may not really be the consumer’s dollar sitting there yet. Their dollar may still be wandering through the banking system.

But we’re over the goal line now, right? Not necessarily.

The touchdown just came back on a flag.

• NSF.
• Chargeback.
• Reversal.

And that expedited-processing fee you paid? Probably not coming back with it. Cost of doing business.

Fine. Carry on, old back office.

Except Sales promised the client we would remit its collections within 24 hours of reporting them collected. The consumer’s dollar hasn’t fully settled yet.

No problem. Pull out another dollar. Wire the client a substitute. Everybody does it. Clients demand it. Competitors promise it. So we do it.

We have quietly transformed a collection agency into a financier of its own settlement cycle.

And if the original payment reverses? Now we have to get our substitute dollar back from the client. How?

Depends.

Bill me. Deduct it from the next remittance. Carry it forward. Let the two back offices sort it out.

Are you still tracking the original consumer dollar?

Good.

Because we aren’t finished.

Now Let’s Calculate Our Fee

That was the objective, after all. Our revenue.

The client says we earn a 10% contingency if we collect while the account is 30 days delinquent. Maybe 20% at 90 days. Perhaps 30% later. You get the idea.

Except every client is different. Sometimes every portfolio is different. Different placements can carry different contractual economics.

Surely the system that has been so carefully trained to determine exactly when, how and through what channel to contact a consumer also knows exactly how much revenue we earned when that consumer pays.

Maybe. And maybe the rate table is static, incomplete or wrong and someone adjusts it after the fact.

No big deal. It’s only revenue recognition. Back office.

Except this particular client wants its money remitted net of our fee. The fee we just said might need to be corrected later. Now the wrong amount goes to the client.

“No worries,” we explain. “Back office will sort it out.” Somehow.

Oh, One More Thing: Sales Tax

Neither the agency nor the client particularly wants to discuss this one. Some jurisdictions tax collection services. The collection system may not know what to do with that.

No problem. There are specialized tax engines that can determine the applicable jurisdiction and rate. Feed them the taxable service fee and the relevant location information—careful, that is the customer address, not the client address—and calculate the tax.

Then what?

• Bill the client separately?
• Deduct the tax from remittance?
• Absorb it?

Ask Sales what the client wants? The client doesn’t want to pay sales tax. Of course it doesn’t. It is already recovering cents on dollars it was originally owed. An 8% tax makes your service look 8% more expensive.

So here is one of those decidedly unglamorous questions: Who actually pays it? And is it being calculated, collected, reported and remitted correctly?

Back office.

Perhaps another round of golf first.

Now Send the Money

Client A has three divisions. Send everything to one bank account.

Client B has three divisions. Send the money to three separate bank accounts.

Which trust accounts fund which remittances? Which legal entity owns which account? Which consumer payments belong to which client? Which fees have already been deducted? Which reversals need to be recovered? Which taxes need to be collected?

No worries. The variable instructions are neatly coded on Post-it notes taped to somebody’s monitor.

What could go wrong?

Then there are the states. Some have their own requirements for how consumer funds must be handled, where trust accounts must be maintained, how quickly money must move, and how records must be kept. So we add more bank accounts. More rules. More reconciliations. More exceptions.

And somehow all of this is still summarized with two words: Back office.

The Last 20 Yards

This is what fascinates me. The collection industry has invested extraordinary amounts of money, ingenuity and increasingly artificial intelligence in getting the consumer to say: I’ll pay.

It should. That is a hard problem. But the consumer saying “I’ll pay” is not the end of the collection process. It is the beginning of the last 20 yards.

That payment still has to be authorized, processed, settled, safeguarded, applied to the correct account, associated with the correct client, evaluated against the correct contingency arrangement, adjusted for reversals, handled for applicable taxes, reconciled, and ultimately remitted to the correct destination.

Thousands of transactions every day, flowing through different combinations of rules.

And somewhere among them may be some real person’s last dollar.

Don’t lose it. Don’t mix it up. Don’t send it to the wrong place. Treat it with the care it deserves. It’s called a trust for a reason.

That isn’t administrative drudgery sitting behind the real business. It is the business.

The consumer-facing AI that optimizes one end of the transaction may be extraordinary technology. But we haven’t revolutionized collections if the rest of the transaction still depends upon spreadsheets, manual reconciliations, tribal knowledge, disconnected systems and Post-it notes.

Maybe “back office” was the wrong abstraction all along.

There isn’t a front-office collection process followed by a back-office administrative process. There is one transaction. Client to agency. Agency to consumer. Consumer to payment processor. Processor through the banking network. Money into trust. Fees and taxes accounted for. Cash reconciled. Funds remitted to the client.

One connected process.

And somewhere, someday, some systems thinker will connect all those dots.

The entire last 20 yards.

What a concept.