The evolution of customer management has been dramatic in recent years, yet overall the area of receivables management has proven to be a laggard in terms of adopting and implementing more efficient and effective solutions.

Customer attitudes are evolving at a rapid rate and rising customer expectations create new credit and collections challenges.

For a generation the Business to Customer (B2C) segment has been going through massive transformation acknowledging the rapidly changing expectations of customers. Some may argue that this is now evolving to the era of Business to Me (B2Me) – one that recognises that customers expect you to know who they are, what their value is to your organisation and to understand what their current and future circumstances and needs are.

At the same time Business to Business (B2B) leaders have been pursuing similar efficiency and performance gains to those achieved in the B2C environment, albeit at a slower rate.

Much of this transformation is reliant on accessing digital advancements, however, when assessing technology solutions and the collections process, it is often difficult to know where to begin and where to stop because the possibilities are virtually endless.

Many enterprises are under significant pressure to both reduce operational costs and improve performance, yet many commercial enterprises continue to handle the collections and risk management processes using mail/email, spreadsheets, and paper. This process often requires access to multiple systems and interactions between departments. Manual investigation involving multiple groups may be required if a customer contests a decision, charge or invoice.

Receivables management's three most expensive inputs are often referred to as the three P's – people, paper, phones all of which can be significantly improved by embracing the future.

Whilst credit scoring has been an essential risk management tool for decades in the credit field, particularly in the B2C market, the range of data sources both internal and external that continues to emerge can take this to a much higher level. So why is it that enterprises are not investing in the rapidly increasing range of opportunities presented?

On the receivables management side, there are even greater opportunities that offer substantial opportunities to develop behavioural analytics to drive more effective collection programs.

Much of the functionality deployed to take Call Centres (cost-cutting initiative) to Contact Centres (strategic customer management initiative) is ideally suited to driving greater efficiency and effectiveness across the credit life cycle, yet many enterprises are laggards in terms of adoption.

Having been immersed in this space for nearly 20 years I take these capabilities for granted, and so in recent times as we see an increase in enterprises seeking support in the more effective management of their credit functions it is essential that all credit leaders understand and preferably pursue many of these opportunities.

Recent research by the Aberdeen Group has highlighted the substantial difference in performance in both accounts payable and accounts receivable between enterprises that are embracing technology and efficiency advances and those that are not.

We believe that one of the reasons for this low take-up in some sectors is indeed a lack of understanding of the capabilities available, the true cost to implement and benefits achievable.

It would be quite easy to fill this magazine with a description of all the opportunities that are available, however in the contexts of this article I have highlighted below what we believe to be the top 10 opportunities for the credit industry to embrace in order to deliver more effective outcomes more efficiently.

The opportunities are:

1. Behavioural analytics to drive effective collection cycles and programs. A scientific modelling approach pulling together everything we know about the debtor allows us to profile far more than just the risk rating of debtors. Being able to use your organisation's customer and collections database to create Customer Segmentation and develop customer response segmentation can be a powerful advantage. We all know different customers will respond differently to contact
channels but we don't always apply this knowledge in a scientific way. Once a debtor has been profiled, a campaign can be implemented to manage them based on much more holistic criteria. This simple 4 box matrix extracted from Collections, A Best Practice Guide by Serco is a simplified example – see diagram below. We know different customers have a different propensity to churn and so we typically have different customer retention strategies. So why, when we know different customers have a different propensity to pay do we mostly use the same rules and methods despite these differences. Behavioural scoring will enable a more proactive approach to collections and ensure that we apply the most effective approach to each customer.

Once the propensity models have been built for each customer (or customer segment) they can be treated differently. This includes the timing of the collections activity, the channel used and the severity of the approach. For example alternative campaigns with different steps and methods might be:
- Campaign 1 (high propensity to pay) 
- Campaign 2 (medium propensity to pay) 
- Campaign 3 (low propensity to pay)

A more advanced approach to campaign management may be seen in Table 1 (see over page). It is also important to match any segment analysis with operational performance and cost in order to further evolve the capability and effectiveness of outcomes.

2. Automated and/or Interactive Messaging – The use of interactive messaging that is often automated and enabled by deployment of the opportunity above allows customer behaviour triggers to trigger messages, and customer responses, to the SMS to initiate the next phase in the collection cycle. Similarly speech based IVRs can allow debtors to interact, perhaps whilst saving face, and can include the option to be connected to a collections officer as part of the transaction. It can also enable "right officer" routing – while retaining efficient work practices, the collections team should use right officer routing to find a balance between transactional and relationship collections. In deploying the methodology you can: 
- Route a previously called debtor back to the same Collections Officer 
- Ensure a more difficult collections call is sent to a suitably experienced Collections Officer 
- Not miss wasted opportunities when the nominated officer is not available

3. Automation of payment options and payment arrangements – Something that was embraced wholeheartedly by the B2C market place 15 years ago is only now gaining substantial traction in the commercial market place. Given the rapid transformation of the market place to a dominance of SME's this is becoming critically important as many SME's behave just like consumers, particularly in the service sector.

4. Voice or call recording – Has developed into contact centres under the guise of "training and coaching purposes" it is much more than that. With the right terms and conditions in place, the use of voice recording of conversations between debtors and creditors for proof can avoid the lengthy paper trails and can have a very positive effect on collection cycles and outcomes and indeed the initial credit granting process.

5. Speech analytics (in real time) is one of the most exciting technology advances in the area of customer management in recent years. Being able to analyse customer calls in real time is an incredibly powerful tool not only for achieving more positive outcomes during the call but also for driving improved effectiveness of team members and ensuring that all interactions are delivered in accordance with accepted standards. Results being achieved already by the early adopters in customer service and sales channels are quite staggering and there is no reason why the same can't be achieved in the credit area. To have customer conversations in a digital format can also play a vital role in further enabling the opportunities presented by detailed data analytics to improve collection effectiveness.

6. Enhanced reporting for workplace performance and results. This includes the development of more effective KPI's and reporting frameworks using the broader range of data that is now available to the Credit Department. The reporting of credit performance is still dominated by lag indicators.

The term lagging indicator refers to measurements that reflect what customers have already experienced or what the business has achieved – they are a bit like rear vision mirrors. By contrast, a leading indicator reflects what you are doing in advance of customers experiencing it. They are a bit like the GPS giving your directions along the journey. Lagging indicators are important big-picture measures of achievement, but they are not prescriptive, and therefore they are not actionable. Leading indicators are internal operational measures that empower teams by letting them see a direct connection between their work and its outcomes (which are the lagging indicators).

In much the same way as customer management KPI's have evolved from operational metrics to outcome metrics, in recent times there is a strong argument that traditional measures within the credit environment also need to be reconsidered and supplemented by such measures as: 
- Right Party Contact (RPC) RPC/ File Dialler Management 
- Promise to Pay (PTP) or call Efficiency PTP/RPC Officer/Team Leader 
- PTP Effectiveness (Kept Rate) Payments/PTP Officer/Team Leader 
- AHT Total Activity Time/Calls Officer/Team Leader z Quality As per the Quality Scorecard by Officer/Team Leader 
- Collection Efficiency – $ Collected/ $ Available by Officer/Team Leader 
- DSO Velocity Index With advanced analytics: you know... so you can calculate – see Table 2.

7. Real time performance dashboards. Again we need, in this high-speed world, to be tracking and responding to performance in real time not after the event where all too often the opportunity has been missed. Every one of us operates in a far more competitive world than we did years ago. Products and services are less differentiated and so the efficiency with which we undertake our administrative activities is having an increasing impact on the overall performance of the enterprise. Being aware of performance as it happens is a key to improvement.

8. Software as a service. For many years the cost of replacing incumbent systems has been used as an excuse not to embrace digital opportunities. Not only has a typical cost to modernise reduced dramatically, but the increasing emphasis on and opportunity to move, expenditure from capital expenditure to operating expenditure makes the use of software as a service a compelling opportunity in many circumstances. It also helps alleviate the risk of getting it wrong.

9. CRM integration/desktop optimisation. Many enterprises still try and collect using legacy billing systems – the old green screen of death! In today's connected world you simply can't expect a new (and likely young) collections officer to tab between billing systems and type specific commands during a collections call. Many legacy systems are cumbersome and lack the intuitive GUI interfaces that are present in just about every other aspect of their dailylife. In these legacy systems, agents are often required to make notes in multiple places, and handle times can be long. There is abundant research showing a link between staff tenure and the technology used to perform the job so if you want to keep the best and the brightest you need to invest. The agent must be in the right state of mind and be able to focus on the conversation when they speak with customers. Asked to use a poor quality or inflexible interface, agents often get irritated, and the customer is likely to sense their irritation, and a poor quality interaction or outcome may result. Integration of data from many sources is necessary to provide the holistic and real-time view of account information that credit and collection officers require to do their jobs effectively. All too often staff are required to interact with multiple systems and screens in order to facilitate transactions with the customer. The ability to provide a simpler intuitive interface for staff is proven in a number of industries and environments to dramatically improve productivity and efficiency. Indeed there are software development companies found on the sole premise of providing an improved user interface for some of the world's largest core systems.

10. Automated and/or predictive outbound dialling. Outbound calling is acknowledged as typically the most effective collection method, but it is also one of the most expensive due to the manual effort and inefficiency. Once the domain of those annoying, anonymous dinner time callers we all experience after a hard day at the office, automation of outbound dialling integrated with core billing and customer management systems is one of the greatest efficiency opportunities available to the credit community. As we all know one of the great challenges of outbound dialling is the strike rates, and in the consumer world using manual dialling methods it is not unusual for a strike rate of one in five call attempts. Effective dialler management uses historical dialling information to better target current debtors and uses past dialler information at a debtor level to determine when that debtor should be called (assuming it was a successful contact) and avoids the time wasted when encountering answering-machines and voice mail systems. This can drastically improve officer utilisation, reduce unnecessary telephony costs and typically accelerate cash flow.

In summary, today's broad range of technologies enable receivables departments to: 
- Increase receipts from collections activity 
- Be more responsive when there are complaints 
- Prevent or reduce the risk of important actions falling through the cracks 
- Better assess the marginal economics of a collections campaign before the campaign begins 
- Improve the quality and timing of decision-making 
- Improve employee enablement and engagement 
- Lower operating costs

Steve Mitchinson is a Director – AICM and Director of BBB Advisory. Visit

October 2015 - FNSORG502 - Develop and monitor policy and procedures - FNS51520 Diploma of credit management

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