Segmenting debtors based on risk and payment behavior is essential for effective debt collection management. By categorizing debtors into different segments, you can tailor your collection strategies to maximize recovery and minimize costs. Here are the most effective strategies for segmentation: Analyzing Credit Scores Credit Score Segmentation Use credit scores…
A new report from Lexis Nexis Lexis Nexis just published an important and interesting document about synthetic identity fraud and its impact on organizations, including the signs of synthetic identity fraud and the challenges in detecting it. haracteristics of synthetic farms and houses, as mentioned in the document, include: According…
The article “Early impacts of removing low-balance medical collections” by the CFPB Office of Research discusses the effects of changes made by the three nationwide credit reporting companies in 2022 and 2023 regarding medical collections on consumer credit reports. These companies committed to removing medical collections that were paid, less…
A Joint Effort by UK Regulators In a joint letter published on 18th March 2024, the Financial Conduct Authority (FCA), Ofgem, Ofwat, and Ofcom have outlined their shared expectations for firms in the financial services, water, electricity and gas, and telecoms sectors regarding debt collection practices. The regulators emphasize…
Facing Recovery Rates at Historic Lows The American auto lending industry is facing a perfect storm. A combination of economic pressures and logistical hurdles are creating a nightmare scenario for lenders struggling to recoup losses on defaulted loans. The Culprits: The Result: Recovery rates, the percentage of the loan amount…
Grupago Secures $4.3M Seed Funding to Transform SMB Credit Landscape in Latin America with AI and Community-Driven Solutions Grupago, a fintech startup focused on providing digital microcredit to small and medium-sized businesses (SMBs) in Latin America, announced a $4.3 million seed funding round led by Deciens Capital, with participation from…
In an era where financial uncertainty seems more like the norm than the exception, the importance of sound financial advice cannot be overstated. The Money Advice Trust UK stands out as a beacon of hope and guidance for those navigating the choppy waters of personal and business finances. Established with…
On 15.01.2024, the Financial Conduct Authority (FCA) published a letter outlining the harms and risks associated with loan-based peer-to-peer lending platforms and the FCA’s strategy to address them. The document is a letter from the FCA (Financial Conduct Authority) outlining their expectations and strategies for Loan-based Peer-to-Peer Lending platforms. …
Navigating Rising Interest Rates with Resilience In 2023, the financial dynamics within the United States painted a complex picture, marked by the resilience of consumer credit amidst the backdrop of rising interest rates. This period, characterized by its unpredictability, witnessed consumers, policymakers, and banking professionals navigating an environment where traditional…
Consumer Financial Protection Bureau The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. https://www.consumerfinance.gov/
The Consumer Financial Protection Bureau (CFPB) announced a significant regulatory change on March 5, 2024, aimed at reducing excessive credit card late fees, which have been a financial burden on American families. The finalized rule effectively lowers the typical late fee from $32 to $8, addressing a loophole that has…
Navigating the Maze of Consumer Misunderstanding In the rapidly evolving landscape of consumer finance, “Buy Now, Pay Later” (BNPL) schemes have surged in popularity, offering the allure of immediate gratification with deferred payment obligations. This innovative payment option has democratized access to goods and services for consumers worldwide, enabling purchases…
Regulatory Environment for Different Entities Navigating the legal frameworks and compliance within the credit and collections field requires a deep understanding of the regulatory environment that governs different entity types. This understanding is crucial not only for ensuring lawful operations but also for minimizing legal risks and enhancing the efficacy…
Risk Assessment by Entity Type The legal implications for credit and collections significantly impact how professionals approach risk assessment across different entity types. Adjusting credit evaluation processes and emphasizing financial due diligence are essential steps in managing the inherent risks associated with extending credit to businesses. The entity type of…
Sole Proprietorships Definition and characteristics Sole proprietorships represent the simplest and most straightforward form of business ownership, where a single individual owns, manages, and is responsible for all aspects of the business. This structure is favored by entrepreneurs who wish to have complete control over their business decisions and operations….
Introduction Importance of understanding legal entities In the intricate world of credit and collections management, understanding the nature and structure of legal entities with whom a business interacts is not just beneficial—it’s essential. This understanding forms the bedrock upon which effective credit policies, risk management strategies, and collections practices are…
What is Customer Acquisition? Customer Acquisition encompasses all processes related to attracting and signing up a new client – from the initial marketing exposure to the public, identifying potential customers, making the sale, signing an agreement, registering and integrating the customer’s details, to establishing a regular and ongoing relationship with…
One might assume that the operations of credit and collections systems exclusively contribute to achieving the desired outcomes for an organization in this area. However, our experience reveals this is not the case. The management of the organization and its policies significantly impact the results of the activities of the…
Customers The interface with customers depends on the organizational structure of the credit and collection activities within the organization. In organizations where the credit and collection department operates directly with customers, this interface becomes primary. Having a direct interface with customers requires credit and collection personnel to be equipped with…
Management The Credit and Collection Risk Manager must maintain ongoing communication with the organization’s management to align the credit and collection policy with the organization’s vision, strategy, and policies. This ensures that credit management practices support the overall goals of the organization and are integrated into its strategic planning processes….
This chapter outlines the foundational methodological framework necessary before delving into the practical aspects of credit risk and collection management. It establishes a structured approach to understanding and implementing strategies within these fields, emphasizing the importance of a well-thought-out methodology to guide practical actions and decisions. This preparation is crucial…
Debts that are not paid on time, organizations and individuals that become insolvent, judgments that are not fulfilled and are not enforced, standing orders and checks that bounce – all of these are a nightmare that could materialize at any moment for hundreds of thousands of organizations and citizens across…
As the UK economy continues to navigate the aftermath of the COVID-19 pandemic, credit and collections managers are facing a complex landscape shaped by shifting labor markets, changing wage dynamics, and evolving consumer spending patterns. The recent developments in inflation and wage growth have brought some relief to households, but…
Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors, and vendor affiliates, representing more than 230,000 industry employees. ACA establishes ethical standards, produces a wide variety of products, services, and publications, and articulates the value of the accounts receivable management industry to businesses, policymakers,…
Before starting to build a reporting system, we must decide on a basis for measurement. In the world of credit and collection, the common basis for metrics and evaluating the world of debts is the organization’s annual sales turnover. Therefore, this is the baseline data that needs to be collected….
The management of credit and collection risks requires the management of a set of monitoring and reporting reports that will enable the activity to be led efficiently and effectively and the right decisions to be made in real time at all administrative levels – starting from the senior management, through…
Another element, which is usually not included in the collection costs, are costs arising from insufficient quality of the credit and collection systems as well as failures in the functioning of the entire organization. The main reason for their exclusion is the difficulty of calculating them, so we will have…
So far, we have referred to the costs of collection from paying customers in accordance with the credit terms agreed upon with them. Now, we will quantify the costs arising from the customer entering arrears. Collection department, centres, and pre-legal – personnel and infrastructure This is the total salaries paid…
Every organization must manage its finances through a bank account. Even when the organization does not sell through credit cards or bank standing orders, then it is not charged clearing fees but still pays fees to the banks. Bank Commissions Bank fees refer to all operations related to cash register…
Agreed on credit terms When an organization sells on credit to a customer, it needs working capital to finance the credit to the customer. This money is intended to finance the cost of the product sold (product, raw materials, labor cost), or the costs of providing the service throughout the…
Offices, computer systems, communication, letters, professional trainings Personnel costs include the total direct and indirect employment costs that apply to the various departments dealing with credit risk management and collections. The biggest expense after personnel costs is the set of infrastructures required for the location of the various teams, the…
In some organizations, the true collection costs are of utmost importance since they constitute a large component of the organization’s expenses. When discussing collection costs, the costs of the personnel directly handling the collection are usually considered, and sometimes, the overhead and administrative overhead expenses are added to them. However,…
StepChange Debt Charity, operating in the UK, is a non-profit organization dedicated to providing assistance to individuals struggling with debt. Founded in 1993, it has established itself as one of the UK’s leading debt advice organizations. StepChange offers free, comprehensive, and personalized debt advice and solutions to people facing financial…
The Money Charity is a UK-based organization focused on improving financial capability and wellbeing. Established for over 25 years, it aims to help everyone in the UK manage their finances effectively. Their approach involves empowering people with the necessary skills, knowledge, and attitudes to handle their money efficiently throughout their…
One topic that is not obvious is why law firms should be incentivized – after all, lawyers are full partners in the success of collections, and their remuneration increases with the increase in the efficiency of legal collection. The answer may lie in the conflicts of interest that exist between…
Below is a list of summary control reports to monitor the end-to-end legal collections process. In the next section, we will present the legal collections dashboard. Market surveys and knowledge sharing sessions: This topic is of great importance for efficient and effective work with the law firms all its components….
Law firms tasked with collecting debts from our clients effectively function as an extension of the organization’s collection apparatus. These legal professionals handle substantial monetary transactions on behalf of the organization. Consequently, it is imperative for the organization to oversee and ensure the prompt and complete transfer of these funds…
Approval and payment of expenses To ensure the efficient and accurate approval and payment of expenses, adhere to the following procedure upon receiving the monthly payment request reports from the lawyers: After the above tests, the employee in charge will approve the payment requests and forward them to his manager…
This summary delves into the insights and key points from a Morgan Stanley article published on 15.09.2023 discussing the burgeoning field of private credit, and that, in my opinion, did not receive sufficient echo. The article outlines the significant growth of this market, which is expected to reach $2.3 trillion…
Legal proceedings entail considerable expenses. The role of the organization’s legal collections department (or the finance department) is to monitor these expenses in various aspects. The main settlement issues and principles of conduct When working with an external law firm, three main settlement issues arise in which it is necessary…
Effective management of work processes in legal collections is paramount. This ensures that operations adhere to established procedures, preventing any discrepancies, errors, or inconsistencies between the organization’s systems and those employed by legal counsel. These controls serve multiple critical functions: Expense Reconciliation: They form the foundation for accurately settling accounts…
Production of documents The production of documents must be carried out as soon as possible in order not to delay the lawyer in his work. Every time the lawyer is forced to stop the process and wait for the document, the chance of a long, poor, ineffective handling of the…
We distinguish between two types of bad debts, each of which has a different write-off procedure: Bad debt due to a very low probability of collecting the debt. Examples include bankruptcies, companies in liquidation, debtors not found, low amounts without a claim, debtors leaving the country or incarcerated, and economic…
Court decision Upon receipt of the judgment from the court compelling the debtor to pay all or part of the debt to the organization, the organization will deliver a copy of the judgment to the debtor and repeat his demand for payment following the judgment. If the customer pays, the…
Choosing the course of the claim Depending on the amount of the debt, the documents to prove the debt and the nature of the sale to the customer, a decision is made on the type of legal proceedings to be filed. The organization must receive instructions in advance from the…
In the UK, creditors have several legal proceedings available to them to recover debts. These include: Each of these methods has its own procedures, costs, and suitability depending on the circumstances of the debt and the debtor. It’s advisable for creditors to seek legal advice to determine the most appropriate…
In the United States, creditors have various legal proceedings at their disposal to recover debts. The specific processes can vary by state, but generally, they include: It’s important for creditors to adhere to the Fair Debt Collection Practices Act (FDCPA) and other relevant laws that protect consumers from abusive debt…
Delivery of warning letters A warning letter to the client for non-payment of the debt to the organization will include the details of the debtor and the debt data as provided by the organization and, in addition the client’s number in the organization, the phone number in the organization that…
Skip-tracing is a process used to locate a person who is missing or has ‘skipped’ out on a legal or financial obligation. Originally used by debt collectors and investigators, the technique has since expanded to various fields, including law enforcement and private investigation. The primary goal of skip-tracing is to…
In this section, we will describe, step by step, the framework of the legal actions carried out by the lawyers – from the stage of finalizing the reception of the cases to the final stage: “closing” the case by collecting and/or cancelling the case by the organization and/or making a…
The framework for the legal treatment of debtor clients is based on a mutual system of task management in which the organization and the lawyer’s office(s) share, with control and management oversight being in the hands of the organization. We will now present again the diagram of the stages of…
Anti-Bribery Policy for Debt Collections Department 1. Policy Statement Objective: This policy establishes a zero-tolerance approach towards bribery and corruption, particularly focusing on interactions with external lawyers and legal service providers. Scope: Applicable to all employees in the debt collections department, including full-time, part-time, contract workers, and management. 2. Definition…
Wells Fargo published an important article on the rise of consumer credit in the US on January 10th, 2024. The article delves into the growing trend of consumer credit usage in the United States, emphasizing a significant milestone where outstanding consumer credit exceeded $5 trillion in November. This increase is…
There are different working methods with external law firms. It is important to examine carefully, case by case, the interests of the parties to prevent in advance damages to the debtors’ customers and the organization’s reputation as a result. Financing of the legal expenses by the organization In most cases,…
Financing legal expenses by a third party, often known as third-party litigation financing or legal funding, is a practice where a third party provides the financial resources to enable a plaintiff to litigate or arbitrate a case. Here are some pros and cons of this approach: Pros Cons In conclusion,…
Potential Future Applications of AI Exploring the potential future applications of AI in the field of debt collection, particularly in areas like predictive analytics and proactive intervention, reveals exciting possibilities for innovation and efficiency. These advancements could significantly transform how debt collection is approached and managed. Advanced Predictive Analytics: Proactive…
Potential biases and fairness concerns associated with AI in debt collection Discussing the potential biases and fairness concerns associated with AI in debt collection is crucial. While AI offers numerous advantages, it’s important to be aware of its limitations and the ethical implications, especially in a field as sensitive as…
Understanding how AI can help ensure compliance with regulations and fair collection practices is crucial, especially given the stringent legal framework governing debt collection. Automated Compliance Monitoring: AI systems can be programmed with the latest regulations and legal requirements in debt collection, such as the Fair Debt Collection Practices Act…
The use of chatbots and virtual assistants for 24/7 customer support and debt resolution The use of chatbots and virtual assistants for 24/7 customer support and debt resolution highlights a significant technological advancement in the field. These AI-powered tools have revolutionized how debt collection agencies interact with debtors, offering benefits…
The contract between the organization and the lawyer aims to maximize the collection of the organization’s debts with a minimum of time and costs invested while retaining the customer when possible and cultivating the organization’s image. The goal should be accomplished through comprehensive and full cooperation that will apply to…
Established in 2021, the Centre for Financial Capability emerged as a pioneering force with a singular vision: to equip every child in the UK with essential financial skills and behaviours from a young age. Their inception was sparked by a pivotal Money and Pensions Service study, revealing that money habits…
Explore the comprehensive archive of the Bank of England’s publications, including vital reports on monetary policy, financial stability, and economic research. Stay informed with the latest updates and historical data insights from the UK’s central bank. BoE – website BoE – News and publications
ARMTech 2024 Jan 17 – 19, 2024 Nashville, Tennessee – United States Dive into the future of debt collection technology at ARMTech, the pioneering event where cutting-edge innovation meets practical application. As a credit and collections expert, you understand the rapidly evolving landscape of our industry. ARMTech is designed to…
While RPA is not AI in the strictest sense, it is often used in conjunction with AI technologies to automate repetitive tasks in the debt collection process. RPA can handle tasks such as data entry, sending out payment reminders, updating customer records, and processing payments, freeing up human agents to…
Some solutions use AI to analyze recorded calls between agents and customers. This technology can identify keywords and phrases, emotion, tone, and compliance with legal regulations. Insights gained from speech analytics can be used to improve agent performance, ensure compliance, and refine collection strategies. Several suppliers provide speech analytics solutions…
These systems use AI to automate decision-making processes in debt collection. For instance, they can determine the best time to contact a customer, the most effective communication channel (email, SMS, phone call), and even the most suitable payment arrangement options based on the customer’s profile and past behavior. This not…
Some companies utilize AI-driven propensity models to predict which customers are most likely to repay their debts. This approach involves analyzing customer data and using machine learning algorithms to identify patterns and predict future behaviors. By focusing on customers with a higher propensity to pay, collection agencies can allocate their…
Several solutions providers offer AI and chatbot-driven approaches for improving collection processes: These providers demonstrate a trend towards integrating AI and chatbots in the debt collection process, focusing on customer engagement, efficiency, and cost-effectiveness. Each offers unique features and benefits that could suit different needs in the collections industry.
Chatbots Chatbots in the debt collection industry offer enhanced efficiency, handling multiple inquiries simultaneously while reducing operational costs. They provide a non-confrontational platform for debtors, fostering open communication and better customer experience. Programmed for compliance, chatbots minimize legal risks by adhering to industry regulations. Their AI-driven personalization tailors interactions based…
Automated Workflow and Data Analysis Document Processing: Risk Assessment: Communication: In summary, AI automates and enhances various aspects of the debt collection process. Document processing becomes faster and more accurate, risk assessment is more comprehensive and predictive, and communication with debtors is more efficient and personalized. These advancements lead to…
Why not sue through an internal legal department? When the overdue debts of the customers are in low amounts, the organization can sue the customers itself, without using an external lawyer. Each collection manager should examine the issue individually. However, she should consider several aspects: Is it worth hiring a…
Introduction AI in debt collections and its growing popularity. AI in debt collections refers to the use of advanced algorithms and machine learning techniques to improve the efficiency and effectiveness of the debt collection process. This technology has been increasingly adopted in the financial sector due to its ability to…
The process and considerations involved in transitioning a client’s debt to legal collections are comprehensively addressed in the chapter dedicated to collection management. The responsibility for initiating the transfer of a client to legal collections lies with the organization, with the collection department handling the actual execution. In this chapter,…
In numerous organizations, legal collections from clients represent a complex and significant issue. The process encompasses various steps, each bearing substantial implications and potential risks. Understanding these risks is vital for effective management and strategy formulation. Financial Costs and Implications: Costs and Economic Implications: Damage to the Organization’s Reputation: Additional…
Navigating the intricate world of legal collections, especially for clients who are lagging behind in settling their debts, can be akin to walking through a labyrinth. It’s not just about knowing the ins and outs of legal proceedings; it requires a broad understanding of legal frameworks and a keen sense…
For decades, the debt collection industry in Singapore operated with minimal regulation, leading to concerns about predatory practices and vulnerable debtors being harassed. However, a turning point arrived in 2022 with the passing of the Debt Collection Act (DCA). This landmark legislation, which came into effect on 1 December 2023,…
Without getting carried away by familiar clichés, debt collection is a tough profession, and debt collectors tend to wear out quickly. Sometimes the agent’s turnover in the collection centers is very high compared to the rest of the organization, and the cost of turnover (placement, sorting, training) becomes a real…
Service efficiency measures An important motto is emphasized throughout this website: the collection is first service. Therefore, measuring and monitoring the collection contact center with collection team efficiency KPIs used in customer service is important. Is it possible to talk about customer satisfaction when talking about collection? The truth is,…
Annual and multi-year work plan When the organization is about to set indicators and goals for the collection center, it must review the organization’s goals in general, derive from them the multi-year goals – usually planned for three years – and based on these, determine the specific annual goals for…
Implications of New York’s decision to remove medical debt from credit reports, with a focus on the potential impact on creditors in the US. Immediate implications for New York creditors: Potential broader implications for US creditors:
The spectre of debt, a shadow ever-present in many lives, can morph into a monstrous reality when entangled with the often predatory practices of debt collectors. In Wales, stories of intimidation, manipulation, and emotional distress at the hands of these agents have reached a boiling point, prompting a courageous stand…
Queue management After segmenting the customers and adjusting the collection process to the nature of the customer, we must define priorities for collection from overdue customers. This is a classic “queue management” problem. The queue can be divided into two main groups: a) normal priority group according to pre-defined criteria;…
Working with a collection contact center allows making efficient outgoing calls to customers or answering incoming calls from customers or a combined use of both methods. We will review the work processes in each of the types of calls and list the advantages and disadvantages of using different types of…
Pre-collection Customer care contact center A pre-collection customer care contact center is a dedicated outgoing call center that handles collection events of type A – a problem with the customer’s means of payment, or type C – failure to pay an invoice on time. Its purpose is to prevent the…
This is a quantitative measure of the total profit a customer is expected to generate for the firm over their entire relationship. It considers factors like repeat purchases, average order value, customer churn rate, and the cost of acquiring and retaining customers. A high CLTV indicates profitable, loyal customers who…
This event is common in most companies – the customer does not pay his bill on the date set and agreed in advance with the organization. Even in this case we must check the reasons for the non-payment and conclude accordingly. In a type D event, there are three common…
The technical rejection of the customer’s direct order occurs following the transmission of the customer’s direct order to the bank or credit company, an action that is usually carried out once every month on the same date. Unlike the events of type A and B, the reason for the refund…
The timing and progression of this type of event are fundamentally different from those of cancelling the customer’s payment method. Here, the failure to honour follows the transmission of the customer’s standing order to the bank or credit company, an action that is usually carried out once every month on…
The first fact we need to learn about this type of event is that it can happen at any given moment. Cancellation of the customer’s payment method does not depend on the agreed payment date. We distinguish two types of cancellations: Cancellation by the customer. A customer will cancel his…
There are different approaches to managing collection through a collection contact center. Some are better, some less. Sometimes, the business structure of the organization, the scope of the debts, the type of customers and the age distribution of the debts will affect the choice of the work method. In the…
A collection contact center is a dedicated contact center whose main purpose is to receive and/or make calls to debtor customers, with the emphasis placed on collection efficiency. What distinguishes a collection center from the collection department? The collection department manages the collection activity from end to end – from…
In conclusion, we will present the expected outcomes from improving collection efficiency due to the use of the measures discussed in the chapter: Figure 42: The expected outcomes of improving the collection systems In the dynamic and often challenging realm of debt collections, the implementation of improved collection systems stands…
The credit and collection risk manager cannot be satisfied with the data at his disposal. To increase efficiency and effectiveness, he must collect external data on projected products of the credit and collection systems in priority for the industry in which he operates. It is customary to organize and hold…
These reports describe the distribution of the debt status in the organization according to the age of the debt. Since the older the debt, the more difficult it is to collect it, this segmentation is of great importance. The Ageing Report is a macro report that provides an indication of…
We have compiled here several control reports for the management of collection operations. We decided to concentrate the super indicators of the collection (profitability, cash flow, customer retention) in the further reporting system section, to provide an overall picture that will reflect the end-to-end credit management and collection. In this…
The administrative tool known as the “debt waterfall” provides the collection manager with an overall view of the integrity of the collection processes and their relative efficiency. The next principle expressed here is that the behaviour of the collection system should be consistent over time, and any change requires an…
A targeting matrix is a tool for implementing the “Pareto principle” – which states that treating 20% of the debtors will bring us 80% of the collection – a management tool that allows the credit risk and collection manager to determine the order of priorities in his work graphically. The…
The management tool “work in progress” (WIP)) is an important auxiliary means for managing the collection processes and their control. We will start with a brief explanation of the theory and move on to its applications in the collection world. The WIP theory belongs to the “family” of models that…
WIP – Work in Process The management tool “work in progress” (WIP)) is an important auxiliary means for managing the collection processes and their control. Focus matrix to manage debtor handling prioritization A targeting matrix is a tool for implementing the “Pareto principle” – which states that treating 20% of…
Citizens Advice UK is a free, independent network of charitable bureaus offering confidential advice and information on a wide range of issues, including debt and money management. With over 500 offices across England, Wales and Scotland, they are the go-to resource for anyone struggling with financial difficulties. Here’s how they…
Website https://www.ukfinance.org.uk/news-and-insight
Here’s a breakdown of some key potential effects: Increased transparency and fairness: Focus on customer vulnerability: Impact on business practices: It’s important to note that the full impact of the FCA Consumer Duty on BNPL firms is still to be seen. However, it is clear that the new regulations will…
The TransUnion Consumer Pulse Study Q4 2023 offers a multifaceted view of UK consumer sentiment amidst the ongoing cost of living crisis. While presenting glimpses of cautious optimism, it also unveils the stark realities of financial strain and diverse risk landscapes across income brackets and generations. Let’s delve deeper into…
Website Consumer Pulse TransUnion’s quarterly survey explores how consumers’ personal finances have changed and what changes they expect in the future. The study measures shifting consumer attitudes and behaviours based on the dynamics of income, debt and identity theft. The analyses and insights give consumers a voice and inform businesses’…
FCA website FCA – News
Here’s a breakdown of some key potential effects: Increased transparency and fairness: Focus on customer vulnerability: Impact on business practices: It’s important to note that the full impact of the FCA Consumer Duty on BNPL firms is still to be seen. However, it is clear that the new regulations will…
Computer technologies and internal information systems When we refer to automation in the collection process, the emphasis is mainly on the processes facing the customer, i.e. – sending letters, automatic dialling to the customer, sending e-mail messages and text messages, as well as disconnecting the supply of services or products…
Collections over the phone Collection over the phone is currently the most basic tool in the collection field. As the world becomes more and more familiar with the saying “yes to the phone”, targeted conversations with customers – an effective and relatively cheap tool – become the most common means…
In principle, the organization is not interested in transferring clients to legal proceedings, because in its view these are expensive collection proceedings that require a lot of administrative attention, the results of which become clear in some cases only after a long time. Sometimes, it is better for the organization…
After the organization met all of its obligations to the customer who did not pay his debt by the terms of the credit (and thus the customer essentially violated the contract between the parties), and after exhausting all collection processes as required (phone calls, letters, voice messages, meetings, etc.), the…
So far we have discussed methods of payment which granted credit to the organisation’s customer. In many cases, businesses do not grant credit to their customers and require full payment before delivering the product or when receiving it. Here are three alternatives: There is no prevention activity here, with the…
Automated collection is collection by pre-determined payment methods which the customer provides at the time of the transaction: direct debits, bank standing orders, standing orders using credit cards and deferred checks (we referred to these payment methods in section 6). At first impression, it seems that collection on time with…
As part of the previous chapter, we proposed proactive actions designed to prevent the customer from falling into arrears. We saw that despite these efforts, some of the customers fell behind in their payments, and we had to approach this group with a first formal payment request. The next step…
The process of collecting overdue debts begins with a formal payment request from the customer. At this stage, we still do not know why the customer has accumulated a debt in arrears, and it is possible that he did not pay for a reason related to the organisation and not…
After having described all the collection activities from customers who pay on time and the activities to prevent a customer from entering into an overdue debt, we will focus on the area of overdue debt collection. At this stage, for some reason, the customer did not pay his debt to…
from customers who pay in a one-time payment before or at the time of delivery So far we have discussed methods of payment which require the granting of credit to the organisation’s customer. In many cases, businesses do not grant credit to their customers and require full payment before delivering…
Collection according to the credit terms from customers who pay by means of payment in advance (automated collection) Automated collection is collection by pre-determined means of payment that the customer provided at the time of the transaction: bank standing orders, standing orders using debit/credit cards and direct debits. At first…
Open credit is a payment method with no collateral or pre-approved means of payment which is subject to agreed commercials or agreed payment terms. It is a credit to be repaid at the end of an agreed payment period (the payment terms), while the customer does not provide any mean…
The collections manager has to focus on prevention to maximise on-time collections: In the following diagram, we identify three main categories of customers by the different type of credit that was agreed with them: We will review the collection process for each category, and we will focus on the Firm’s…
This section focuses on the two main collection processes: To complete these two processes, we use different types of collection strategies: In this section, we will describe in details each stage of the collection process, in accordance with the bill-to-cash cycle diagram below. Next: On time collections
The decision on department structure and attribution of responsibilities When we come to decide on the structure of the collection department, we need to review a full range of factors. The structure of a collection department of a 2 million customers firm will be different from the structure of the…
A Firm that is used to collect its invoices late from most of its clients should not consider it as a fatality. To overcome such a situation, the Firm will need to change its corporate culture and incorporate a true belief that the Firm has the power to influence its…
As for the Credit policy, the Business Policy of the Firm defines the Collection policy. We will here discuss the Collection policy as a separate document from the Credit policy. However, in various firms, the two are combined and depend on the size and structure of the firm. Collections Policy…
Example of a mission statement for the collection department To be leaders in the efficiency of collections form firm’s customer in comparison to our competitors. Our main fields of focus and excellence will be: It is important to specify that all these KPIs shall be measured over time as a…
Introduction Collections are one of the economic and financial pillars of a firm. It completes the cycle of sales, production and service by assuring the return of cash invested into the cycle of sales. We define collections, in all its aspects, as a part of the cycle of sales. To…
This chapter introduces the Credit and Collections risks in the firm, the main factors of risk and the key indicators to measure them, considering relevant information on the country economics. We will first consider macroeconomic factors like country risks and market specific risks, and we will drill-down until specific risks…
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