Businesses involved with debt collections need to measure and report specific collections goals. That seems obvious, but many companies still don’t follow collections best practices when it comes to forming goals and measuring success.
When you set clear goals and measure the right metrics, it’s easier to identify and solve challenges, improve processes over time and maximize efficiencies.
There are eight steps you can take to better measure your collections performance. Implementing them will help you improve your collections department’s success rates, and as a result, your company’s bottom line.
Every organization should have an in-depth understanding of their goals and what they’re measuring.
To do that, you must define what success means to your organization. Be aware: it can mean something different for every company. Some might set revenue goals. Others might want to improve operational outcomes by a certain percentage. And some may want to simply hit project completion goals like implementing risk scoring technology or installing a document management system.
Consider some of the following examples of collections goals:
Improve kept promise ratios by 10%.
Improve self-cure rates by 5%.
Grow collections revenue by $10,000 per quarter.
Collect 4% more per account or portfolio.
Collect 4% more per collector employed.
Improve collector productivity by 5%.
Reduce the time it takes from initial delinquency to settlement.
Once you establish your goals, you’ll want to determine a single place for all of your data to live before you begin measuring.
Often times, collections departments waste time looking for data across multiple systems. By centralizing data under a single collections management authority, you will be able to measure important metrics across the entire debt life cycle, from the start of the collections process through recovery and abandonment.
That doesn’t just make it easier to measure against your goals; it also ensures consistency and accountability. This results in the industrialization of the collections process and produces superior outcomes, higher efficiencies and better results.
Your metrics need to be adaptable to the four phases of the collections management process: soft, pre-litigation, litigation and recovery. The first two are earlier phases during which a “softer” approach is recommended. Your metrics may skew toward increasing kept-promise ratios by a certain percentage or amount here since you’ll want to emphasize working out a solution while preserving customer relationships in these early phases.
In the later stages, however, the focus shifts to protecting assets and minimizing losses. Your metrics for success will shift accordingly. Pay attention to the phase when considering which metrics determine success in light of the goals you drafted in Step 1.
Now that you know your goals and phases, you must determine the metrics that are important to managing your staff and their capacity. This is important because people are the largest cost in your collections budget. Consider measuring the following metrics to track capacity across portfolios:
The number of accounts.
Personnel shift ratios.
Consider using regression modelling to better forecast capacity, if it is available to you. Predicting how many people each project requires is a necessity for successful business operations. And measuring these metrics is one of the most important ways to make sure you don’t waste time and resources across projects.
Segment customer portfolios by different criteria that make sense for your business and your goals. Use both static and behavioural criteria where necessary. Product type, customer exposure and account balance are examples of static metrics. Examples of behavioural metrics include kept-promise ratio, recidivist and time since last max bucket.
This will help you to provide the right offer at the right time and preserve the customer relationship.
In the business of debt collections, countless hours are spent reaching out to people and failing to get in touch with them. It’s time for collectors to ditch their phone-only approach. Technological innovation has changed the way consumers communicate.
Consumers are communicating and doing business over multiple channels such as mobile, computer, tablets, social media and more. Debt collectors who use multiple channels to engage with debtors can quickly evaluate which settlement options and methods customers prefer.
The single most important metric to measure is how many times a collector has contacted someone because collections success is a direct function of how many times collectors reach out in a human way across channels. Remember: Depending on your phase, it’s important to preserve customer relationships while reaching a settlement.
Measuring the performance of collectors is critical. Regardless of the amount of money they’re bringing in from collections, performance may not be as high as it could be.
By measuring it, your organization can identify what areas need to improve. Once you’ve addressed performance problems, you can then use metrics to encourage optimal performance.
To encourage collectors to hit peak potential, which in turn makes the business more money, create incentives to reward collectors with positive metrics. These incentives can be financial or non-monetary gifts like gift cards, etc.
A specialized collections software solution is the easiest and most effective way to track all of your metrics and improve performance through measurement. Once you’ve decided to invest in a software solution, it’s important to invest in one that covers time, product line, location and organization.
Time — A system should cover all stages: soft, pre-litigation, litigation and recovery.
Product Line — Make sure it covers retail products (consumer loans, car loans, housing, credit cards) with or without collateral, small business loans and corporate loans, factoring and leasing.
Location and Organization — Choose a system that centralizes your organization’s data in a single place for better measurement.
By setting and measuring specific goals, your collections efforts will improve. Collectors will be held accountable for their performance, managers will be aware of which practices are working, and the bottom line will improve.
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