Getting the Basics Right

In this 3 part series of tips we look at some of the basic fundamentals of debt management and how getting the basics right can improve the overall effectiveness of a collections department.

The final tip in this series looks at specialisation and how specialised functional areas within a centralised collections department can maximise the overall efficiency of the department.

There are a multitude of functions that a person could perform in a collections department and although certain functions are more complex than others, each function is different and necessitates different skill sets. It requires little debate that a collector who specialises in a specific function will be able to perform that function more effectively than a general collector. It is for this reason that an organisation should set up specialist functional areas within its collections department and allocate collectors to the different functional areas based on their experience and skill sets.

The collections department should be divided into 3 different functional areas. The first functional area is known as early stage collections and applies to accounts that are mildly delinquent. The collectors in this area will typically collect on accounts that have missed one or two payments. The primary objective of early stage collections is the rehabilitation of the customer. The collectors should therefore be more customer service orientated. Although the number of accounts in early stage collections is generally higher, the outbound telephone calls tend to be similar and consequently less complex in nature.

The second functional area is late stage collections and applies to accounts that are seriously delinquent. The collectors in this area will typically collect on accounts that have missed three or four plus payments. The primary objective of late stage collections is the recovery of the outstanding balance as opposed to the rehabilitation of the customer. The collection actions are harsher and more diverse in nature. Typically, a more experienced collector with strong negotiations skills is required for late stage collections.

The cut-off between early stage collections and late stage will differ from organisation to organisation and will depend on the stage at which the organisation no longer regards the customer as a good customer and the retention of the customer is no longer of primary concern.

The third functional area is called ‘policy groups’ and this team will deal with all accounts with special circumstances that fall outside of the normal collection processes. The accounts that typically fall within this area are deceased, bankrupt, skip tracing, fraudulent, disputes, 1st debit order unpaid, multiple instalment arrangements and so forth. These are all specialised areas and consequently require specialist skills.

The level of difficulty associated with collecting payment on accounts will differ according to the product type, level of delinquency, the potential risk of the customer, the type of technology utilised, etc. It therefore goes without saying, that the collectors’ skills and personality types required to perform the various collection functions will have to match the level of difficulty in order to achieve optimum results.

Structuring the collections department into specialist functional areas that will allow the skills and personality of each collector to match the type and level of difficulty of the collection action will not only improve customer service but will also optimise the collection results.

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.