Where would we be without the services of collection professionals?
With the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry barely cooling, we are seeing an interesting shift in the consumer collections space. Financial Hardship assistance has been in this space for some time, and there is a plethora of written material on the subject. What is of interest is the way in which financial services to consumers is being viewed, and how these organisations are reacting to the spotlight.
As I work through the consumer lease environment, I am seeing complaint after complaint hit the desk of the Australian Financial Complaints Authority (AFCA) in the way in which collections are conducted. With the requirements of disclosure to the consumer, there is an education revolution happening. Customers know good collections from bad collections.
This means there are more educated consumers that are in the market than ever before. It is then conceivable that if your collections systems and processes have gaps in them, these educated consumers could tear apart the effort and cause the organisation to lose cash.
Financial Hardship assistance makes sense from the organisation’s perspective, from a bottom-line perspective, but this should not be the driver to providing this assistance. The customer is very important in the cycle, and by working with the customer and their changing life circumstances, builds a better market and can make a huge difference to someone’s life. It could be a life changing experience. By not providing the assistance to the customer as the main driver could also be a life changing experience, for the negative.
Having said that, there is a need for organisations to ensure they are protecting their cash flow. To marry the two seemingly diverse views together is not that big a stretch. That is, if you have a view of the collections function that aligns with the wellbeing and financial health of the customer. That view would not be the traditional view of collections but morphing that view into the facilitation of payment view.
This is not a move away from collections but utilising the collections skillset to negotiate payments with the idea of partnering with the customer to get them to the end of their obligation. As they trip, the collections team is there to help catch them, lifting them back up to continue their journey. This may be through the supply of financial hardship assistance or understanding for life’s little blips with promises to pay or payment arrangements, however temporary. It could be with regular contact to work through any stresses or misunderstandings. The result is a customer in financial hardship today is a good strong customer tomorrow. If they slip again, the process repeats until they are successful in getting to the end of their obligation.
I can see the argument for collections skills in an after-sales service environment, where the lines between customer service and collections are blurred to the point of not being recognisable. The way to implement this into any team is to start by viewing the process as a facilitation of the agreement, where the collections team is the support team, the truth tellers, the shoulder to cry on.
The collections skillset is already far advanced in this state, where the evolution of collections in the consumer space has been morphing into this role for more than a decade. Probably longer. I say a decade because it has probably been this long since I was in the consumer space last. A lot has changed in that time.
The findings of the royal commission just confirm what I have seen of these changes, what I believe to be the one and only true measure of an organisation’s success: public legitimacy. Public legitimacy is how the world sees the organisation, which can enhance the organisation’s ability to partner with their current customers and attract new customers. This would result in increased profits and the round is complete. Both parties benefit from the interaction.
Again, this moves the collections function into the facilitation of the success of the customer to complete their obligation. It adds to their life in a positive way, removes some of the stress points, and still creates profits for the organisation.
The importance then, for an organisation, is to have good robust collections processes and systems to facilitate a change in thought process, a re-framing of focus, to understand what the customer is wanting to achieve and marry that with what the organisation is trying to achieve. Sitting on the same side of the table in the negotiation with the customer is the secret to marrying the two objectives and achieving success for both the company and the customer. Sitting across the table is a surety for disaster.
Step one is to understand what the customer wants to achieve, and that can only come from good communication at an individual level. Step two is to understand where the gaps are between what the customer wants to achieve and what the organisation wants to achieve. Step three is to build the bridge between the two.
I have said many times that all collection discussions are about setting up for the next six to twelve months good payment behaviour, and this starts by understanding the person you are dealing with. Through this understanding you are listening, you are applying empathy, and you are setting up good payment behaviours for the future, you are facilitating a successful completion of the obligation.
Collections skillsets are primed for utilisation in this facilitation function, with a depth of knowledge and on the ground experience, showing once again the value of the collections team to the organisation. In the consumer space, this is the profit centre mentality. This is a value adding asset. This is collections at its finest.
Paul Burgess B.BusCom CPA CMgr FIML MCMI MICM Cdec (Qld)
General Manager - Collections, Alpha Group of Companies