Why Outsourcing Your Collections and Recoveries Can Improve Business Performance
Outsourcing takes collections and recoveries to a new level. The technology, data, compliance skills and specialist collection resources available through a managed services model outstrip those available to credit providers in-house.
If you haven’t given serious consideration to outsourcing your collections and recoveries operations you could be missing a valuable business opportunity.
The obvious benefits are those common to many forms of outsourcing. Firstly, using the specialist resources of service providers is often a more agile response to changes in market conditions, regulation or cost constraints. It gets a job done and saves the client firm from having to invest its own resources.
Secondly, with technology evolving rapidly, using external providers’ systems saves having to draw on internal IT budgets. And, thirdly, an outsourced resource can be an extension of your own business. It’s like having a division, department or capability to draw upon without having to foot the bill or add to the internal management burden.
Outsourcing collections and recoveries operations brings particular advantages in addition to these generic gains. Here are the five of them:
As credit growth has fuelled the rise in overdue accounts, outsourcing collections and recoveries keeps pace with this costly trend.
Externally managed collections and recoveries services can call upon skills, knowledge and experience not typically available in in-house departments.
Compliance. The advantage is two-fold. Firstly, external providers may have significantly more experience in meeting compliance requirements due to their work with a range of creditors or debt buyers. Secondly, by employing a compliant provider, the reputation of the client’s organisation with the regulatory authorities will be enhanced.
Many organisations are limited by the internal data they hold on their customers. An external service provider will be able to enrich data by drawing on external resources and partner debt collection agencies (DCA), enabling them to be more effective.
The breadth of their experience with customers, their familiarity with the Financial Conduct Authority’s (FCA) Consumer Credit sourcebook and the reach of their DCA partners will enable them to achieve higher net collection rates and greater levels of customer rehabilitation.
For these reasons, a close examination of the outsourced collections and recoveries proposition deserves careful consideration.
Practically speaking, a managed service model performs certain key roles inherent in the collection of overdue accounts. In doing so, they reduce the work that the credit-providing client would have to do itself. For example:
Developing a strategy for collections and recoveries based upon rigorous analysis of available overdue customer data.
Data entry, coordination, cleaning and enriching.
Making a choice of suitable DCAs based upon a knowledge of their particular capabilities and matching them with the character and performance of the past-due portfolio.
Adopting the correct approach to customers, at the right time, using the most appropriate means of communication.
Providing real time activity reporting to the client at all times, so that it is fully briefed as to the state of its portfolio.
The same services can be delivered to a range of creditors whether they are banks, utilities, retailers or debt purchasers.
In all cases, the overall result is improved business performance, whether measured by net recoveries, customer retention and rehabilitation or cost savings. All of these will feed through into lower levels of provisioning, reduced capital impact and improved returns on investment.
In these ways, the collections and recoveries operation becomes business enhancing rather than a drain on an organisation’s resources.
Cost effectiveness can be measured through actual cost savings; net recoveries, customer retention and rehabilitation and the revenues this produces over the future of the client-customer relationship.
Flexibility is part of the outsourced offering. This is demonstrated by the scalability of the managed service offering; the availability of specialist DCAs as and when required and through controls available to the client in terms of monitoring, measurement and reporting by online reporting.
Compliance is much less burdensome if it is carried out by a high integrity managed service provider, whose day-to-day work involves compliance processes.
The use of DCAs can be optimised by means of a managed service approach, targeting key skills at particular aspects of a debt portfolio to best effect.
The managed service provider’s approach will always be customer-orientated and based upon fair treatment. This underpins all aspects of the outsourced collections and recoveries operation.