When it comes to collections, cutting costs while also improving performance may seem like a tall order—especially when the resources you have to dedicate to time, personnel, and technology are already spread too thin.
Since collectors might have a hard time reaching delinquent borrowers during normal working hours, your first idea to improve collections rates may be to have your team make calls after hours and on weekends. Unfortunately, then you have to account for the increased operations cost you’d incur from the added expenses of paying your employees overtime and the additional overhead cost of keeping your branch open longer. Not to mention the opportunity cost that comes from these employees having to dedicate their attention to collections activities, when they could be performing more essential tasks.
In this article, we will discuss five strategies that will help you to improve the performance of your collections efforts.
In the past decade, technology has introduced a host of tools and solutions that can make your collections efforts easier and much more effective. Adopting and deploying new technology and integrated solutions can help streamline the process of collecting on delinquent accounts.
The FinTech industry and the things that make it work—hardware, software, and services—are trending toward integrated solutions. In other words, users are accessing related products and services via a single solution of their choice. This is quickly becoming a standard model because integrations deliver convenience for both collectors and borrowers. When your credit union uses technology in this way, you can maximize your employees’ time, stay competitive, reduce your regulatory burden, and become more productive and efficient.
Comprehensive reporting is an important aspect of any collections operation. Beyond simply reporting total collected funds, information such as promises to pay and caller notes can also help you evaluate borrower conversations. Gathering and analyzing data from reports can help cut down on delinquency rates by pointing to common causes and potential solutions.
Most credit union executives spend a good deal of time evaluating their collections performance, but it’s also important to proactively monitor the efficiency and efficacy of your or your partners’ efforts. Analyzing these reports can help you identify potential areas of improvement and are useful reference tools for a quarterly or semi-annual review. Some of the standard reports that you need to be paying close attention to in order to improve your collections efforts include:
- MTD (Month to Date) Daily Report
- Client Action Item Report
- Balance Impact Report
- Invoiced Detail Report
A well-established training program is critical to the success and compliance of a collections operation. Training is a vitally important component of any collections team to help reduce errors and improve performance. Collections-specific training is a rigorous program that should include instruction in areas such as payment negotiation, customer service best practices, compliance with key regulations, and conflict resolutions.
When evaluating your training process for collections, ask yourself the following questions to ensure that you’re optimizing your efforts:
- How long is your training program and how is it structured?
- How is compliance training administered?
- Do you have ongoing training for your staff?
4. Quality Assurance
Every credit union should have established quality assurance processes when it comes to collections activity. Because your reputation is contingent on how you perform, your credit union should invest in a number of quality assurance workflows. To help you evaluate your collections performance, ask your team these questions:
- What percentage of collections calls are reviewed by the management team? How often are these reviews conducted?
- Is there an established feedback process for collectors AND borrowers? What does it entail?
- Is there a documentation process for collection calls?
- Who is in charge of keeping up with the most recent compliance regulations, and how are changes disseminated to the staff?
- How and how often is borrower feedback distributed back to your credit union?
The goal here is to ensure that you or your collections partner is actively looking for ways to improve the collections processes in order to guarantee the best service and performance.
Outsourcing some or all of your credit union’s collections efforts may be the most cost-effective and robust solution to improving overall collection performance. A third-party collections team can collect on a dollar for much less than it would cost a credit union.
When you outsource collections, it removes a heavy burden from the shoulders of your internal staff and opens up space for your institution to focus on more critical efforts. This freeing up of time and resources creates an opportunity for your credit union to expand on areas with potential growth and develop overarching strategies to increase your bottom line.
Outsourcing collections activity also has the added bonus of freeing up office space and eliminating resources dedicated to back-office processes. These resources can then be shifted to concentrate on efforts that build and grow customer relationships.
Collecting on delinquent accounts is a rigorous process that takes time, money, and resources. If you want to improve the performance of your collections efforts, the first step is to assess what you’re doing right and in what areas you can progress beyond your current level. For help with this process, check out our free guide, A Guide to Auditing Your In-House Collections.