Capacity planning is commonly used in business computing and information technology. Simply put, it’s a process that helps determine what resources a business will need to satisfy the changing demands for its products. In a collections department, personnel capacity planning helps your organization understand how many employees you need to manage a certain number of accounts, including accounts today and those projected for the future.
EXUS Collections & Recovery Blog
Traditional collections operations used tactics like cold calling that made measurement difficult. Now, in modern debt collections, metrics have expanded and evolved into collector productivity, collections and recovery performance, and capacity planning. Your department should gather data on all segments and report on specific metrics to improve collections performance.
The collections and recovery industry is one of today’s most vital and fast-paced business segments. Unfortunately, many collections businesses still employ traditional practices like cold calling, while attempting to compete in an increasingly complex world.
Billionaire Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Customer service doesn’t get the attention it should in collections circles. After all, “customers” in this case are usually debtors who owe the organization money from one or more obligations. Why would we focus on anything other than collecting as much as possible, as quickly as possible?
Several years on from the world financial crisis, banks still have to deal with its consequences. Besides the financial impact and the damage to their reputations, banks have had to learn to operate in a new world – a world of flat economies and rising levels of customer debt. Non-performing loans have increased and customer indebtedness, in general, has been seen to have a significant effect on the banks’ net profitability. Increasing collection costs, growing bad debt write-offs, and the requirements for higher provisions against loan losses have all combined to make managing credit loss a key business driver, with a direct impact on the banks’ profits.
Once upon a time, the customer-bank relationship was single channel. Loan products were straightforward. And consumer debt relationships typically occurred between few parties.
My, how times have changed. Collections is now:
- Multi-channel, taking place across phone, email, social media and online self-service options.
- Highly complex, with new debt products (like Islamic financial instruments) providing banks with new opportunities and collectors with new challenges.
- More technical than ever, requiring advanced software and processes to address the burden of non-performing loans.
In fact, says CEB TowerGroup, “loan collections costs have been the fastest-growing segment in loan servicing.” Controlling these costs is a mission-critical priority for organizations that want to protect profits and grow. However, process improvements are not enough to close the gap.
That’s why organizations are turning to process automation.
Loan collections costs are spiraling out of control, according to CEB TowerGroup. Thanks to a variety of factors, including a fourfold increase in delinquencies from 2007 to 2010, the cost of servicing non-performing loans has skyrocketed. It stands at 15 times the cost of servicing a performing loan.
When a customer moves into the delinquency phase, it’s harder to get them to pay off debt. That means prevention is a top collections strategy. After all, stopping customers from entering delinquency improves outcomes faster than recovery strategies.
Could your organization do more to prevent delinquencies, rather than deal with them after they happen? If so, there’s a tried-and-true recipe that modern collections departments use to reduce delinquencies. Keep reading to learn all its ingredients.
Personal debt is something everyone handles differently. In a fast-paced and consumer-focused society, not all customers are receptive to collector outreach. Many consumers prefer to have non-interruptive, self-driven resolutions to their problems. This is especially true for sensitive matters like personal debt.
To put it in perspective, you’re more likely to purchase something when you’re browsing on your own rather than when a sales person contacts you. You can apply this same frame of mind to paying off debts. Answering the phone about debt you owe is even more uncomfortable than an unwanted sales call. Consumers usually avoid this discomfort by not answering. As a result, nothing gets resolved.
A self-service collections tool allows customers to manage their own debt obligations. Even better, banks that provide self-service as an option for customers increase collections rates, since customers can resolve obligations on their own time, in their preferred way. That’s because self-service tools give customers three major features they crave: control, convenience and mobility.