In the current economic environment, creating holistic collection strategies across your organization to improve efficiency and maximize recovered dollars is critical to ensure that your organization meets key business objectives. With risk exposure unstable and the volume of outstanding accounts escalating, it is more important than ever to optimize early- and late-stage collections strategies to maximize recovered dollars.
Using optimization, organizations can expect to:
Improve the efficiency and effectiveness of the collection process, including individual collector performance and collection buckets .
Minimize collection costs by identifying the most effective ways to allocate resources.
Optimise workforce through alignment of collection capacity plan with Country (Risk Management) overall plan.
Implement optimal assignment of collection inventory to collectors coupled with sales incentive alignment.
Having spent three years leading Business Analytics Group and several months leading Collection Restructuring Project in a multinational bank, I've discovered 4 Steps Collection Optimization to maximize dollars collected & minimizing collection expenditures and I’ve also come to understand why these steps are so effective:
Step 1. Risk Appetite
Collection and Risk Management must establish a common understanding of risk and should define the maximum level of risk tolerance in each area of risk before taking action; the amount and type of risk that an organisation is willing to take in order to meet their strategic objectives. Organisations will have different risk appetites depending on their sector, culture and objectives. A range of appetites exist for different risks and these may change over time.
Step 2. Capacity Planning
Collection capacity planning should serve as a link between numbers of collectors and the overall strategic plan of an organization with a set of quantifiable measures that an organization uses to gauge or compare performance in terms of meeting their plan. Key collection performance indicators vary between companies, depending on their priorities:
Example of Collection Capacity Planning Indicators:
@2015 Red & White Consulting Partners LLP
Step 3. Optimize Collector Assignment
This exercise is to assign an optimum level of accounts or amount inventory assignment, which is likely to be made-up from a diverse distribution of actual account risks (which accounts have the highest payment potential):
low risk accounts
medium risk accounts
high risk accounts
very high risk accounts
Using collection score, an organization is able to leverage an advanced mathematical algorithm to determine constraint-based decisions that deliver customized collection strategies to recover more dollars faster, or maximize accounts cured.
Prioritize collections queues based on a detailed analysis of individual consumer contact strategies. Focus on debtor accounts with the ability to pay to eliminate wasteful spending.
Prioritize delinquent customers by total outstanding dollars and bottom line profit.
Identify the most effective allocation of resources (letter/call center/email) to minimize costs. Reduce workflow treatment expenses on collection accounts that are least likely to pay
For Recovery bucket, it will confidently identify collection accounts to sell or send out to third party.
Step 4. Performance Management
Establish activities which ensure that goals are consistently being met in an effective and efficient manner:
Back-Testing: To implement the process of applying an analytical method to historical data to see how accurately the strategy or method would have predicted actual results.
KPI: To define a a process by which team leaders and collectors work together to plan, monitor and review an collector's KPI and Achievement. Time motion study may be implemented to measure dial time, conversation time, update time, idle time, historical checking time, calls: attempt > connect > contact > promise made.
@2015 Red & White Consulting Partners LLP
Incentive Scheme: To implement the critical design parameters for incentive schemes, that include:
The timing of implementation
Frequency of incentive payout
The weight of incentive in total remuneration.
Cost Benefit Analysis:
To estimate and total up the equivalent money value of the benefits and costs to the collection optimization project to establish whether they are worthwhile.
The outcome of the analysis will determine whether the optimization project is financially feasible, or if another project should be pursued.