If you own a debt collection agency, your collection strategy plays a significant role in shaping the future of your organization. A proper debt collection strategy, like any good business strategy, must be efficient — maximizing resources at the lowest cost. To do this, agencies need to use modern technologies and methodologies to maintain a secure, legal and long-term outlook toward collections.
Here are some of the key elements to integrate into your debt collection strategy to increase your odds for success while keeping costs low.
• Customer-Oriented Operations: Customer-oriented operations focus on making 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 alongside web-based methods. Self-service portals such as online payments, payment apps and automated phone calls can allow for secure and easy collections. I’ve found that when a debtor has an easier time making payments, they are usually more willing to work out a payment plan.
In my experience, online methods are currently the easiest and most secure way to accept payments. Tools such as PayPal and Square let you send invoices and receive payments without a third-party merchant credit card services group, which charge high fees and have high restrictions. I’ve also been seeing more pre-programmed settlement portals where debtors can make offers to settle debts or schedule payments without human input.
• Up-To-Date Communications: On a related note, since communication channels are constantly changing and evolving, it’s important to keep up with the latest technologies. Automating your debt collection process is key, as this will act as a steppingstone to cut your collections costs while also helping you see consistent results. Automating your communication channels will also enable quick payments, settlements or reminders (through text or email), improving 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, older communication methods that receive little success need to be reconsidered or modified.
• Applied Analytics: Using analytics in your debt collection process can help you avoid bad debts and difficult collections. With the help of analytics, you can easily assess a customer’s receivables, whether they are monthly, quarterly or due in full on invoice receipt. Once you know the overall pattern of your customer’s accounts receivables, you can save them from unwarranted risks they are likely to encounter. For example, analytics can help you track customer payments and notify you in case of habitual or gradual lateness, allowing you to “get ahead” of possible problem accounts. On the whole, analytics can help keep your organization away from bad debt. In this way, they will make your collection strategy more effective and holistic with uninterrupted cash flow.