Lately I have been pondering why AR collections in the professional services have been lagging behind their commercial entities. Over the past few weeks I have given insight into some of the major reasons. It wasn’t until reading the article, “Watch These Fast Growing Technology Trends”, in the March 2008, Credit Today magazine that I began giving more thought on the finer details of the causes for delinquent receivables.
The last 50 years have brought more technology to the market place than all preceding history. Each day more companies are bringing better and faster tools to the market than currently available. With the onset of electronic commerce, technology built on the other side of the planet becomes easily accessible by organizations in small towns. With all of this influx of technology, why aren’t organizations reaping the benefits? For the most part they are, however not to their full potential! The gap in productivity between potential gains and actual gains plagued me during my early years as an accountant. I saw the rise of technology and I myself assimilated it into my professional life as fast as it was available. I adopted technology quickly, but it seemed that the rest of the world did not realize the same gains. As I moved from public practice into a law firm, I realized that the problem was even worse than I had experienced previously. It wasn’t until my first few years in the technology field, that the problem became blazingly more pervasive.
My fascination with this ever growing gap between potential gains and actual gains due to the introduction of technology began to become the focus on my thoughts. I often wondered if I was the only person who saw this problem so clearly. In the late 1990’s, I speculated that the gap was the result of organizations simply failing to put in the 3rd and 4th most important element in the assimilation of technology. I reasoned that organizations spend a fortune on hardware, software, and then go lean on training and almost nothing on business process reexamination. Here were organizations that were spending a fortune on the latest tools, but they reaped only marginal productivity gains. The result, a faster way to undertake the old processes!
Interestingly enough, through my quest to understand this phenomenon, my research, and ultimately my thesis, lead me to the Productivity Paradox. Although first identified in the mid-1960s, it didn’t become a concept of intense study until the mid-1970s. The concept in research literature is defined: As new technology is introduced into business, worker productivity decreases. Turban et al (2008) redefined the stance as the “discrepancy between measures of investment in information technology and measures of output at the national level.” Suffice it to say that this topic is vigilantly debated by economists all the time.
Whether the underlying reality of the paradox is solved or not, should not impact our here and now! We need to understand the role of technology in our environment, and realize that it is always changing. What we need to be very cognisant about is to not only understand the new tools, but most importantly take the time to reexamine our business processes so that we do more than simply speed up our old processes.
On that note, I will leave with you one of my favorite quotes. In speaking to Ed Poll on the same topic, Ed said “technology is only a tool for collections, never to replace the human element”. A substantive quote was made in his book, Collecting Your Fee. Tools without knowledge of their use and more so the lack of insight into new ideas, simply aligns new tools with the functionality of old tools.
In receivables management, Getting with IT, should have you focused on getting with Information Technology – all the new tools available to you. In addition, getting with IT should be getting the Intellectual Training to understand the value of the tools, but more importantly the Insightful Thought on better ways of undertaking current practices.