If you own a debt collection agency, your collection strategy plays an important role in shaping the future of your organization. A good debt collection strategy, like any good business strategy, should be efficient and maximize resources at the lowest cost. To do this, agencies must use modern technologies and methodologies to maintain a secure, legal and long-term perspective on collections.
Here are some of the key elements to incorporate into your debt collection strategy to increase your chances of success while keeping costs down.
• Customer-oriented operations: Customer-oriented operations aim to make payments easy, efficient and secure for customers (debtors). With the rise of smartphones and apps, collection agencies should consider accepting or using app-based payment methods in addition to web-based ones. Self-service portals such as online payments, payment apps, and automated phone calls can enable secure and easy collections. I’ve found that when a debtor has an easier time making payments, they’re usually more willing to come up with a payment plan.
In my experience, online methods are currently the easiest and most secure way to accept payments. Tools like PayPal and Square allow you to send invoices and receive payments without a bundle of third-party merchant credit card services, which charge high fees and have high restrictions. I’ve also seen more pre-programmed settlement portals where debtors can bid to settle debts or schedule payments without human intervention.
• Up-to-date communications: On a related note, since communication channels are constantly changing and evolving, it’s important to stay on top of the latest technology. Automating your debt collection process is essential as it will serve as a stepping stone to lower your collection costs while helping you achieve consistent results. The automation of your communication channels will also allow quick payments, settlements or reminders (by SMS or e-mail), improving the customer experience at the same time. Since many people ignore calls from phone numbers they don’t recognize, and with little use of fax machines, old methods of communication that receive little success need to be reconsidered or changed.
• Applied analysis: Using analytics in your debt collection process can help you avoid bad debts and difficult collections. Using analysis, you can easily assess a customer’s receivables, whether they are monthly, quarterly, or fully due upon receipt of the invoice. Once you know the overall structure of your clients’ accounts receivable, you can protect them from the unwarranted risks they are likely to face. For example, analytics can help you track customer payments and alert you to usual or escalating delays, allowing you to “get ahead” of potential problematic accounts. Overall, analysis can help your organization avoid bad debt. This way, they will make your collection strategy more efficient and holistic with uninterrupted cash flow.
• Centralized debt collection system: One of the most effective ways to reduce the costs of your debt collection processes is to create a centralized system. A centralized system is a program that allows all collection personnel to view the same accounts on the same database. It runs dialers and prompts collectors to work or review accounts, and triggers alerts when a problem arises. When properly configured and maintained, the system has all the information available on a particular debt, easily searchable and searchable by the account manager. A centralized system, easy to use and containing all the relevant information, allows companies to reduce costs and time spent on accounts to a minimum.
Unified debt collection management can include factors related to workflow, decision making, customer-centric service, data connectivity, etc. All of these factors can come together to create a more advanced and personalized debt collection process. A debt collection process like this will not only get you lower costs, but will also help increase collections by enabling personal engagement with your toughest debtors. It can help you convert receivables into valuable customers while increasing your organization’s collections and debt settlements.
These elements can help you every step of the way in your debt collection process while ensuring the financial stability of your organization for as long as possible.