Transparency In Collections

Let’s face it, collections is a complex job – it involves negotiation, data, a constantly shifting landscape, and unforeseen obstacles and challenges, for everyone from the collector to the credit manager to the directors of the corporation.  At worst, it’s not easily understood at the top of the corporate food chain why there is outstanding debt and why it is not paid, and at best, our assumptions today may not be applicable to the aged A/R list six months from now.

With daily challenges to overcome, it’s important to be transparent – to share successes and failures without fear of judgment, so the process of collections can be improved.  Here are a few examples I have seen and what I think can be done.

Collector Not Meeting Targets

If a staff member isn’t meeting goals, be it reducing DSO at a creditor’s office, or a contingency collector not meeting their revenues, it’s not solved by yelling and waving arms in the air – there’s a reason revenue isn’t coming out at the other end.  Usually it’s systemic, based on the data being worked, or the behaviours of the collector, both of which are usually fixable.

If a collector fails to collect, their approach may be wrong, or they are failing to connect the integral parts of the collection process.  This isn’t about a three minute maximum call time or how many washroom breaks they take (which a lot of call centres seem to obsess over), it’s about some basic KPI’s.

First, is the gross effort there?  Are they making the minimum number of contact attempts in a day that are expected?  This should be tallied from telephone, email, sms, or any other communication channel your company may use.  If they are below your gross effort threshold but ahead of goals, it’s less of an issue, but if they are behind on targets and not meeting basic minimum effort levels, this is the place to start.

Next, how many contact connections, or right party contacts are made through those gross efforts?  This may be slightly influenced by the collector with their tone or sense of urgency, but if RPCs are not happening, it may be a systemic issue that the management, agency or creditor need to address – when and how often are you attempting to contact a consumer?  Is there a diminishing law of returns on multiple attempts on the same file?  Are you using a communication channel that the consumer would not prefer?  This comes down to a percentage number of successes vs. gross efforts, and you have to determine what is successful – if a collector is reaching 20-30% of his gross contact attempts, that’s pretty good.

Lastly, what is the conversion, cure, or collection rate on those right party contacts?  The best collector in your company may convert close to 80% of RPCs to payment, and the least skilled collector might only convert 40% -- this is when you can reverse engineer their success rate vs their RPC and gross efforts to calculate their effectiveness.

So, with all these numbers in place, fixing revenues can be correcting the most egregious shortfall – if your collectors are recovering 70% of RPCs, but only have a 5% RPC vs contact attempt rate, it’s not about being more effective on a call or limiting their call times, it’s about finding a way to raise RPCs through calling at peak times, using a more effective communication channel, or just increasing gross contact attempts.

Where transparency comes in is that the collector has to be free to share their frustrations or obstacles with management, and management has to share their file flow plan or overall strategy.  Neither party can be successful without sharing what goes wrong, and what goes right.

Collection Agencies Not Meeting Targets

On a larger scale, creditors often drive third party agencies to hit goals based on historical liquidation, cash flow needs, or competitive performance levels by other agencies also retained.  What do you do, as an agency not meeting targets, and a client conference call turns into a demand for more success?  Rather than look at a shared excel sheet and agree the numbers are poor, the process of collections needs to be examined by both sides.

First, is the data being received of sufficient volume and quality?  If a creditor normally assigns 4000 files a month, and they drop to 1000 files, at some point the revenues will dip (likely at the 30-60 day mark, but your collection model may vary).  If the 4000 files assigned go from having 3000 contact telephone numbers to 500, revenues will also dip, and the expense of locating these people will go up on the agency side.  If symptoms can’t be examined a solution can’t be found.

So, you are an agency owner, and your client conference call is going poorly because you are in 4^th place out of 4 agencies – what do you do?  You ask questions and share your challenges.  If your key collector has gone off on sick leave, or your program is undermanned for some other unforeseen circumstance, you have to tell the client – not telling them makes you look incompetent, telling them makes you look aware of your challenges and obstacles, and from there you can build and share a plan to fix things.  If you need to man up a program, give realistic dates, and if you need to bring in new technology, share implementation dates.

If you aren’t aware of what is going wrong, ask questions – does the client have data they don’t share in the data dump, like email addresses?  Have they changed how they handle the files internally on DSO 1-90?  Has their credit application process changed, so the quality of data working its way through the credit cycle is less accurate?  You won’t know unless you ask.

A shortfall is an opportunity for creditors and agencies to compare notes and make improvements – just like the example between individual collector and manager, creditors and agencies have a responsibility to each other and each side has a hand in performance levels.

Nothing Has Gone Wrong … Yet …

Above and beyond that, share your ongoing attempts to improve your company, internally as a creditor or externally as an agency – if you are doing well, that’s no need to hide your ongoing plans with your team, or your collection partners.  Are you rolling out a new phone system?  Giving your website an overhaul?  Updating your process manual?  These things will either show responsibility, commitment and intelligence.

Turning Around The Meeting From Hell

So, I have an example – I was the operations manager for a large agency, and we were called to fly out to the creditor’s office to explain why we weren’t doing well.  In fact, we were doing well – we were 1^st place out of 4 agencies, and our liquidation was nearly double that of the 2^nd place agency – but the creditor, having internal goals that were not being met, wanted us to do more.  So … in preparation of the meeting, I did a huge data dump into a handout for the board members before I got on the plane.

Rather than stand there and be flogged, I went into the meeting with a full outline of our process as it applied to this creditor, with gross contact attempts, RPCs, and conversion rates – I had it by individual team member, and as an agency as a whole.  And what we found was our conversion rate was 75%, but our RPC rate was only 4%.  So we were able to focus the meeting on getting better data from the creditor, more data that was not being shared or exporting, and talking about the process.  What could have been a meeting of pointed fingers and follow up calls turned into a healthy discussion about how our companies interfaced – because we were transparent.

Conclusion

Collections is no longer the ‘don’t ask, don’t tell’ environment.  There’s nothing to be gained by trying to make your collection process ‘secret’ at any level.  Often collectors will have more insight than managers as the boots on the ground, and can share what works and what doesn’t if involved in strategy meetings, and everyone will be better for it.

Creditors more and more want to know what agencies are doing on their behalf, and how it will affect their return on investment and brand reputation – it would be irresponsible to not share everything that is happening when asked, or even when not asked.

I am a huge fan of transparency – I’ve added a bunch of tools to automatically email my clients when a payment is received, a file starts to escalate because of a complaint, and our manuals and company documents explain process and culture to our staff, and to our clients so they can understand where we are coming from and what we can do to make things better.  I think that all companies benefit when this happens.

If you have a question about what to share, or how to ask a creditor or agency about their process and improve performance, revenues, or communication, I’m very passionate about this subject and happy to share what I know.  Feel free to give me a call at any point.

Thanks very kindly,

Blair DeMarco-Wettlaufer

KINGSTON Data & Credit
Cambridge, Ontario
226-946-1730
bwettlaufer@kingstondc.com