Maximizing the Productivity and Effectiveness of Collectors

Collections is a key area of any credit granting organization, and it is common for organizations to invest in processes, technology and strategy in an attempt to increase the efficiency and effectiveness of this area. Unfortunately, it is also common for organizations to overlook the most important factor in collections – the collectors who make contact with customers every day.

This month’s tip continues our discussion on negotiation and the different ways of improving a collector’s negotiation techniques.

Negotiation Tip 5 – Explain the Repercussions of Non-payment

Good customer services should be part of every collections activity. For the most part, an organization tries to rehabilitate accounts that are in collections, so that they can be retained on the portfolio as active, profitable accounts. Poor customer service in collections would damage future customer relationships and may lead to significantly increased attrition, or non-payment. In order to avoid this when negotiating a PTP, it is essential to explain to the customers the repercussions of Non-Payment.

The following are some of the points to remember:

This rule will force a client to make a promise
This will also put pressure on the client to keep the promise
The client fearing the repercussion will give you control

It is best to negotiate after you have stated the payment missed and obtained the reason for non-payment. This enables you to negotiate around the client’s circumstance to obtain a realistic PTP which will be kept. Taking unrealistic PTPs, like insisting the customer pay the full amount immediately, when the client is unemployed and awaiting his pension or UIF, will cause low PTP kept ratios, however it is best practice to always negotiate for the full amount due where acceptable special circumstances do not exist.

It is important to negotiate for the payment of the amount and payment due date simultaneously – in this instance one can affect the other, some customers may make part payments immediately and the remaining payment when they receive their salaries at a later date.

Once you have explained the repercussions of non-payment; e.g. non-payment details being posted on the Credit Bureau or the account being handed over to external debt collectors or legal collections, the client will want to make a PTP and more importantly, will honor it. By explaining the repercussions, you will also be educating the customer on processes which he might be unaware of. This could lead to the customer self-curing in future.

This approach ensures that the credit grantor has control, along with the trust of the client. By informing the customer of the repercussions of non-payment, the credit grantor takes control of the situation and has the client in a place where he now feels the urgency to repay the debt. He will try as far as possible to keep his promise and should circumstances prevent him from fulfilling his obligation, he will then call you, to make an alternate arrangement, for fear of what non-payment will do.

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.