They Made a List, Checkinâ€™ it Twice

As the accounts receivable management industry recovers from the holiday season, my mind wanders back to a much-ballyhooed December missive from Collection & Credit Risk, the “TOP 10 INDUSTRY RANKINGS.”

The cover of this well-read industry publication displays this title, chiseled in stone, bursting on top of columns inside a Roman Coliseum. Inside, John Frank, our friend and the magazine’s editor, describes the magazine’s rankings as a de facto industry standard: “If you don’t see your firm’s name there and we sent you a form to return but you didn’t, please don’t complain. Fill out the questionnaire next year before more customers and clients ask you why you didn’t make the list.”

In October’s edition of the magazine, John exhorted the industry to disclose its financial performance even more forcefully: “We’ll be ranking by revenues as we did in the past. Yet we see firms return rankings forms without revenue numbers. Please consider: Any competitor worth his or her salt already knows how big your firm is, how much you charge and who your major customers are.”

Whoa. With all due respect to Collection & Credit Risk and of course to the companies that appear in its rankings, some context is in order here.

First, plenty of companies that could have appeared on these rankings chose not to.

As strategic advisors to the accounts receivable management industry, Kaulkin Ginsberg and insideARM see financial statements of many companies, some of which could have appeared on these lists. Of course, we would never publish information that would compromise the interests and wishes of our clients. While we have considered the publication of lists like those released by Collection & Credit Risk, we have declined to do so out of respect for our clients and other companies that choose to keep financial information private.<!–PAGEBREAK–>Second, company owners and managers have good reason not to disclose their financial performance.

Private companies are private for a reason. At the risk of stating the obvious, private companies have the right to withhold financial information from competitors, clients, employees, and certain other constituencies (the IRS not being one of them). Recent experience even suggests that within this industry, disclosure may be overrated, since the trend among the largest companies these days is more toward going (or remaining) private than going (or remaining) public. It goes too far to suggest that companies in this industry must publicly disclose their financial performance in order to be competitive.

Third, there is an interesting alternative to these rankings.

Kaulkin Ginsberg’s Operational Benchmarking Service allows accounts receivable management companies to compare themselves with industry peers without having their financial information made public. We are collecting information from companies in the industry under the protection of confidentiality agreements and returning back analyses of how these companies compare with others – all for free. I welcome you to learn more about this service and consider participating, not for the sake of public disclosure, but for the sake of better insight into your own company’s performance.

To the companies who desire public disclosure – Happy New Year, and I look forward to reading about your successes next December in Collection & Credit Risk. To those companies who do not desire public disclosure – Happy New Year, and I hope you will consider our alternative in 2007.

Paul Legrady is Director of Kaulkin Ginsberg’s Research Group. He is responsible for the development and delivery of custom research projects and research publications analyzing the accounts receivable management industry. Kaulkin Ginsberg is the parent company of insideARM.com.