Collections Software

--by Mike Sutton

In today’s collections environment, the challenges of meeting an organization’s financial objectives are more difficult than ever.  Case volumes are higher, accounts are more difficult to collect and changing customer behaviors are rendering existing business models less effective.

When responding to recent events, it is not uncommon for organizations to take what may seem to be the easiest path to success — simply hiring more staff. Perhaps in the short-term there may appear to be cash flow improvements, but in most cases, this is not the most effective way to cope with long-term business needs. As incremental staff is added to compensate for additional workloads, there is a point of diminishing return on investment and that can be difficult to define until after the expenditures have been made. Additionally, there are almost always significant operational improvements that can be realized by introducing new technology.  Furthermore, the relevant return on investment models often forecast very accurately.

So, where should a collections department consider investing to improve financial results? The best option may not be the obvious choice, and the mere thought can make the most seasoned collections professionals shutter at the thought of replacing the core collections system with modern technology. That said, let’s consider what has changed in recent years and explore why the replacement proposition is not nearly as difficult or costly as in the past.

Collection Management Software
The collections system software industry is on the brink of a technology evolution to modern and next-generation offerings. Legacy systems are typically inflexible and do not allow for an effective change management program. This handicap leaves collections departments unable to keep up with rapidly changing business objectives that are a critical requirement in surviving these tough economic times. Today’s collections managers need to reduce operational costs while improving these objectives: reducing losses, improving cash flow and promoting customer satisfaction (particularly with those who pose a greater lifetime profit opportunity).  The next generation collections software squarely addresses these business problems and provides significant improvement over legacy systems. Not only is this modern technology now available, but the return on investment models are extremely compelling and have been proven in markets where successful implementations have already occurred.

As an example of modern collections technologies that can help streamline operations, check out the overview and brief demonstration that is on this link:

www.experian.com/decision-analytics/tallyman-demo.html.
 

Due to the recent economic events, increased collections workloads are straining client infrastructures and resources. Most clients in North America operate their delinquent accounts on legacy collections systems that are inflexible and expensive to manage and maintain. A recent and abrupt spending shift has drifted toward collections tools, data, operational, efficient workflow and decisioning systems.

On the information technology front, the collections workflow software industry is on the brink of a technology shift from legacy systems to modern next generation offerings that are typically coded in Java. Very few collections software vendors have actually released and implemented their next generation products and are preparing to do so over the next six to 12 months. Clients are aware of this technology shift and the interest of many end users has been heightened and many are actively researching and shopping.

Reducing operational costs is an urgent priority for most financial institutions and utilities. Legacy systems do not allow management to change strategies or flows quickly or in a cost effective manner, which leaves most collections departments unable to keep up with rapidly changing environments and business objectives. Clients also have critical business needs to reduce losses, improve cash flow and promote customer satisfaction. 

Many clients maintain multiple systems and it is common that these disparate systems do not communicate with each other. Consolidating collections operations and databases into one central system is strongly desired and presents an opportunity for significant financial gain.

 

In addition to behavioral models, collections management and account management groups need the ability to implement strategies in order to effectively handle and process accounts, particularly when the optimization of resources is a priority. While the behavioral models will effectively evaluate and measure the likelihood that an account will become delinquent or result in a loss, strategies are the specific actions taken, based on the score prediction, as well as other key information that is available when those actions are appropriate.

Identifying high-risk accounts, for example, may result in collections strategies designed to accelerate collections activity and execute more aggressive actions and increase collections efficiency. On the other hand, identifying low-risk accounts can help determine when to take advantage of cost-saving actions and focus on customer retention programs. Effective strategies also address how to handle accounts that fall between the high- and low-risk extremes, as well as accounts that fall into special categories such as first-payment defaults, recently delinquent accounts and unique customer or product segments.

To accommodate lenders with systems that cannot support either behavioral scorecards or automated strategy assignments a hosted collections software decisioning system can close the gap. To use these services master file data needs to be transmitted (securely) on a regular basis. The remote decision engine then calculates behavioral scores, identifies special handling accounts and electronically delivers the recommended strategy code or string of actions to drive treatments.
 

This post is a feature from my colleague and guest blogger, Mark Sofietti, Associate Process Architect in Advisory Services at Baker Hill, a part of Experian.

Change is inevitable.  If you are not changing, then you are standing still and the world around you is changing.  In today’s market, the banking industry seems to be changing at a very rapid pace.  The current crisis that we are in, as an industry and as a nation, is forcing institutions to revisit their risk management policies and procedures to make the appropriate changes needed to remain healthy and profitable.  However, the current crisis is not the only reason why institutions should focus on change management.  Change management needs to be appropriately handled in bad and good times.  Understanding change management is always a necessity to a well-run organization.  Whether it is a reorganization, a new collections software system, a new policy or moving to a new building, change can cause a great deal of stress and uncertainty -- but it can also cause benefits.

So, as managers, you may be asking, “What can I do to ensure that positive changes are happening within my organization?  What are some of the items that I should consider when I am bringing about organizational change?” 

There are four necessary steps that need to be taken in order to improve the success of an initiative that is causing change to an institution.

1.  Understand current situation and needs
The first item necessary to have a successful implementation of change is to understand the current climate and reason for the change.  People are scared of change and many believe that “if it is not broken, don’t fix it.”  This is why the reasons for change need to be understood and communicated to all employees.  Changing, just for the sake of changing, causes a great deal of unrest to a department or organization.  With clearly defined reasons and objectives, the implementation of change can have a lower degree of failure.

2.  Identify resistance
During change, there will be some form of resistance.  As a manager, you will need to have thought through from where resistance might come and consider how to work through confrontations. 

One type of major resistance can be people who are looking out for their own self-interests.  People have their own agendas within the workplace and could view change as a threat to their advancement.  When dealing with these situations, you will need to have a good deal of collaboration and involvement from these individuals in order to successfully implement change.  Note, given this resistance, that the change will not happen as quickly and your timelines should be appropriately set. 

Another major resistance that may slow down the implementation of change is the lack of trust in the leaders enacting the change.  In these situations, management should build teams of trusted and respected people whose objective is to eliminate underlying resistance. 

Finally, providing facts and examples regarding the change is a necessity for a successful implementation.  Doing so can reassure employees that the change being made is beneficial to the organization.

The next post will continue with the additional two necessary steps that need to be taken in order to improve the success of an initiative that is causing change to an institution.

 

Part one

In today’s collections environment, the challenges of meeting an organization’s financial objectives are more difficult than ever.  Case volumes are higher, accounts are more difficult to collect and changing customer behaviors are rendering existing business models less effective.

When responding to recent events, it is not uncommon for organizations to take what may seem to be the easiest path to success — simply hiring more staff. Perhaps in the short-term there may appear to be cash flow improvements, but in most cases this is not the most effective way to cope with long-term business needs. As incremental staff is added to compensate for additional workloads, there is a point of diminishing return on investment and that point can be difficult to define until after the expenditures have been made. Additionally, there are almost always significant operational improvements that can be realized by introducing new technology and the relevant ROI models often forecast very accurately.

So, where should a collections department consider investing to improve financial results? The best option will probably not be the obvious choice and the mere thought can make the most seasoned collections professionals shudder … replace the core collections system with modern technology.

That said, let’s consider what has changed in recent years and explore why the replacement proposition is not nearly as difficult or costly as it once was. In addition, I’ll discuss how the value proposition typically makes this option extremely appealing today.

The collections system software industry is on the brink of a technology evolution to modern, next-generation offerings. Legacy systems are typically inflexible and do not allow for an effective change management program. This handicap leaves collections departments unable to keep up with rapidly changing business objectives that are a critical requirement in surviving through these tough economic times. Today’s collections managers face the need to reduce operational costs while improving other objectives such as reducing losses, improving cash flow and promoting customer satisfaction (particularly with customers that pose a greater lifetime profit opportunity).  The next generation collections software squarely addresses these business problems and provides significant improvement over legacy systems. Not only is this modern technology now available, but, the return on investment models are extremely compelling and have been proven in markets where successful implementations have already occurred.

This blog is the first of a four part series. I will continue to explain, in detail, the benefits of next generation collections systems while specifically focusing on improved productivity and cash flow; reduced operational and overhead costs; and improved change management processes.

Please check back soon!