The collections department – structure, responsibilities and authority

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 collection team of a firm servicing 2 thousand customers. The difference relies in the size of the workforce, the equipment’s size, and the investment on management and control.

Other parameters influence the collection department structure:

• The number of active customers.
• The type of customers (private customers, business customers, overseas customers, etc.).
• The volume of invoices, payments, receivable accounts.
• The average amount of debts (a large number of small amounts to collect will be dealt differently than a small number of large amounts).
• The payment methods (cheques, credit/debit cards, direct debits, bank transfers, e-money)
• The conditions of payments (single payment, recurring instalments).
• The collateral provided.
• The need to complex accounting settlements (multiple invoices, credit notes and refunds).
• The number of business units involved in the sale process.
• The localisation of the customers (domestics or foreign) and multi currencies invoicing.
• The nature of the products – the collection process has to be adapted to the product and could be different for different lines of products (like products sold and service contracts).

Structure based on operational duties

In this type of structure, that generally serves a large number of customers, there is a separation between the front line contact centre and the back office. The front line deals directly with customers, while the back-office is responsible for accounting and settlement tasks. In addition, there is a control team that centralise all processes at the firm level. In other words, the structure is based on the particular skills of the teams, but no-one performs an end-to-end job. This way, the communication skills of trained collectors are not wasted in accounting or settlement tasks, and those tasks are transferred to skilled accountants.

The size of the workforce is frequently a consequence of decisions on the department structure. For instance, if customer retention is highly valuable, the Firm will prefer to perform outbound calls to overdue customers than sending them automated (and sometimes threatening) letters. The meaning of this decision will be an increase in the workforce.

Additional segmentation based on skills

Sometimes, entire segments of customers require specific skills, like overseas customers, that might require foreign language and multi-currency management.

In summary, the choice of a structure based on operational duties is based on:

• The evaluation of the operation volumes.
• The evaluation of the responsibilities on all credit and collections processes, including multiple reporting lines to customer service, sales or finance.

Responsibility assignement matrix – RACI matrix

The RACI matrix is a model that helps to map the different roles, functions and responsibilities in processes across the organisation.

As collections involves several function on the revenue chain, we can build an example of RACI matrix for collections as follows:

Role	Responsibility assignment
Responsible	The collection process will be performed by the customer care department.
Accountable	The finance department will be accountable for the process and for applying the firm collection policy across the Firm.
Consulted	The IT, Marketing and Sales department will be consulted to elaborate the proper processes.
Informed	VP Sales, Marketing and Finance will be informed on performance and strategic issues.

Responsibilities and authority of the Credit and Collections Risk Manager

Macro responsibilities in the Firm

• Building the credit and collections policies and strategies under Firm policy.
• Design, development and implementation of advance information technologies for the underwriting, collections processes and cash management in accordance with internal and external customers needs.
• Continuous benchmarking with other credit and collections risk managers and competitors to support the ongoing development of the credit and collections processes in the Firm.

Responsibility and authority regarding day-to-day management/efficiency and efficacity/ control and goals achievement.

• Meeting Firm’s targets – total collected, DSO, outstanding debt, bad debt provision and bad debt expense.
• Meeting the collections department budget.
• Strict application of policies and procedures and if needed of the Firm’s quality procedures. Maintenance and update of the existing policies and procedures. Periodical audits.
• Support group, internal and external audits of the function.
• Satisfying the needs and requests of internal and external customers. General satisfaction of the Firm’s customers of collections services, including financial information and cash management.
• Ongoing analysis of the cost of collections and cost saving initiatives.
• Safeguarding receivable assets and management of operational risks linked to the collection process.

Responsibility and authority regarding the collection workforce.

• Recruitment of a skilled workforce, training and ongoing coaching.
• Management of the employees and managers to perform the department’s mission.
• Management of all trainings needed across the Firm to support the “Collecting Firm” culture. Ongoing support of other departments needs related to the collection process.