Optimising the H-factor

In this tip of the month we look at how collectors in a centralised outbound collections department, where a cycles delinquent methodology is applied, should be assigned in order to optimise the effectiveness of the collection strategies.

Best practice collection strategies should recognise that not all customers are the same and that they should consequently not be treated the same.

In the early stages of delinquency the primary objective of the collections strategy is to rehabilitate the customer, i.e. to return the customer to an ‘open to buy’ position. The emphasis, when dealing with low risk customers during the early stages of delinquency, should therefore be on customer service. Although the preservation of the relationship with the customer in the earlier stages of delinquency remains the primary objective, the high risk mildly delinquent customers should be treated in a more assertive manner.

However, once an account becomes seriously delinquent, for example three or four cycles delinquent, the primary objective of the collections strategy is no longer the rehabilitation of the customer, but rather the recovery of the outstanding balance. Customers whose accounts reach a high level of delinquency should therefore be treated more harshly due to the high risk that they pose to the organisation.

It is generally accepted that it is more difficult to work high risk accounts than low risk accounts. Collectors should consequently be segmented according to their experience, personality type and skill levels and should be assigned to queues based on the degree of difficulty working the accounts within the queues.

The experienced or more assertive collectors should be assigned to work the high risk queues and the inexperienced or more customer service orientated collectors should be assigned to work the lower risk queues.

Assigning collectors according to their personality type and skill sets will ensure the successful execution of an organisation’s collections strategies.

Charl Van Rhyn is a Senior Consultant at PIC Solutions, the largest customer management solutions company based in the Southern Hemisphere. He has over 8 years of credit and risk management experience as a practising attorney, specialising in collections during all stages of the delinquency life cycle. At MBD Attorneys, a leading South African debt collection law firm, he served both in the capacity as Director Litigation and Senior Accounts Executive. Key responsibilities included the management of key business relationships within the banking, financial services, furniture retail, telecoms, utilities and health & leisure industries. He holds a B. Juris and LLB degree from the University of Potchefstroom. He is an admitted attorney of the High Court of South Africa and a member of the SA Institute of Credit Management.

About PIC Solutions
PIC Solutions provides customer management solutions to a wide range of blue-chip organisations. We are experts in the fields of credit, risk and marketing and have an established track record of success powered by solutions.

For more information on how PIC Solutions can optimise the credit life cycle of your business please visit www.picsolutions.com.