Technology and Collections - Part 2

This series of tips will review the various technology options that collections managers have at their disposal. This tip of the series will continue the discussion from last tip on some aspect of collections strategy and the various factors that need to be considered when selecting and implementing a collections system.

Tools to Enhance Collections Strategy
Collections strategy is the set of high level decisions made by a collections area. Typically these include the following:

1. Collections policy rules – for example, accounts with a "holder deceased" status need to be dealt with in a particular way by a particular group of people.

2. Tilting – this refers to setting appropriate actions to accounts – for example, in early stage collections, accounts with high risk will be accelerated and a harsher tone and a more confrontational type of collections action will be used.

A good collections strategy will take a base of delinquent accounts, segment them using a set of sound collections principles and then allocate an appropriate set of actions to each account.

A number of technologies can enable or assist in this: collections systems, account management systems and even certain diallers. Since this is such an important part of the collections process, it is critical that before a collections manager purchases any system that they ask the following questions:

1. Does the system have adequate reporting to support the collections strategies? It is critical that every system used for collections strategies must have the ability to track the performance of the strategies and look for signs of success or failure. An ideal collections system would include reports such as delinquency transition matrices as these show how accounts are rolling forward or backwards between delinquency states.

    

2. Is the system being purchased the correct system to deal with collections strategies? Many clients make the mistake of assuming that an analytical system – which could have many of the features mentioned above is appropriate as a collections strategy system. However these systems are generally not created for production environments – which means there are serious technical risks such as down-time, lack of adequate IT support and data loss issues. These systems lack the features required to execute the actions and often have to be linked with other systems which can lead to a technical nightmare of interlinking systems and interfaces which cost a fortune to maintain.

    

3. Is the system technically appropriate for the organisations IT environment? Collections systems have to interface with account processing systems. It is vital that the system selected does not cause administration and support headaches by being based on a different technology platform or different database backend. It is also important to ensure that the system is robust and stable, as system downtime is an extremely costly exercise in a collections department or company.

This tip looked at the considerations a collections manager should look at when selecting an appropriate system to deal with the strategy side of collections. The next tip in the series will provide a set of tips to look at when considering the operational side of collections and collections systems.

Paul Shortridge is a Senior Consultant at PIC Solutions, the largest customer management solutions company based in the Southern Hemisphere. He has over 5 years experience in the financial services industry. Previously with Nedcor as manager – innovation in retail credit, he headed up a team that successfully rolled out projects to reduce risk, increase revenue and reduce costs across all credit and transactional products. In this role, he implemented initiatives that increased revenue by R100 million and introduced their 8-second home loan pre-approval process. As lead consultant at London Bridge Group, Paul was responsible for the business lead in large scale project implementations as well as assisting the sales team with expanding their market in South Africa. He holds a BSc and MSc in Chemical Engineering from the University of Cape Town.