While debt collection is certainly less glamorous than some of the other topics that I’ve addressed, improving your company’s collection efforts can increase your profits today. In a world of new economic challenges and technological opportunities, choosing the right digital partner for collections has become more important than ever.
The debt collection environment has changed dramatically over the last decade. We’ve seen defaults surge during the global recession, and Europe suffered more than most. Nonperforming loans in the euro area quadrupled from less than 2% of total loans in 2007 to nearly 8% by 2013 according to KPMG. The large number of nonperforming loans has become the greatest barrier to a robust economic recovery in Europe. Even companies that previously did not have to worry about collections found themselves facing these issues for the first time. On the other hand, price deflation raises the real value of debts in collection. What is more, new computer software increases the recoverability of debt by making it easier to track debt throughout the collection process. The world has changed, and your company needs a debt collection solution that is equal to today’s challenges.
Anyone who has ever worked in collections knows the importance of taking early actions, and computer generated triggers help debt collectors take the right action at the right time. Triggers help employees to focus on high-risk customers so that all the necessary documentation can be saved at the beginning when documentation is easy to obtain. However, many disputes can be resolved quickly by entry level employees using modern software. ACA, the international association of credit and collection professionals, found that it took 23 days on average to solve a generic dispute, and an average of 13.5 days to solve a specific dispute. If it usually takes longer than that to reach a resolution, it may be time to upgrade your software.
Many debt collectors do not take maximum advantage of available technology. ACA found that while 99.7% of members surveyed used letters for collections and 98.5% used telephone calls, only 31.7% used email. The best approach is to focus on lower cost channels like email so that your collectors save time and money from the beginning. Integrating software with telephones and email is also increasingly important because of the rise of analytics. Data analytics are crucial to improving your debt collection process, but manually transferring data usually makes analytics prohibitively expensive.
While analytics are crucial during most of the collection process, maintaining proper documentation becomes increasingly important as debts move into the legal system. Yet 44% of collectors surveyed by ACA responded that their current software does not allow them to transmit dispute information and details back to their clients. Is it any wonder that an average of 14.5% of disputed debts could not be verified? It doesn’t have to be that way. Software can automatically update the debtor’s record and maintain a central record of all actions taken. Properly documented claims are much more likely to get a hearing and reach a successful settlement. Once a settlement is reached, software also allows collectors to track payments and compliance with repayment agreements.
Every collection situation is different, so software must be customized to meet your needs. Banks need early warnings, law firms need documentation, and everyone needs to comply with specific national and local laws. At Relational, we know that customization belongs at the center of digital partnership solutions for debt collection today.
