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:
- Customer’s satisfaction and retention;
- High level of cash-flow from customers;
- Reduction of outstanding debts;
- Reduction of bad debt and write-offs;
- Reduction of the level of credits granted to customers due to the poor quality of service;
- Accounts information and collection service trustworthy, produced in real-time to internal and external customers;
- Reduction of the cost of collections;
It is important to specify that all these KPIs shall be measured over time as a percentage of credit sales. The improvement will be achieved through a highly qualified workforce, advanced information technology and pro-active cooperation though-out the whole firm.
The purpose of collections in the firm:
To collect the product of sales in the local market and globally. It includes the control of the daily and monthly volumes of collections and the maximisation of efforts to collect receivables in time (by the agreed payment terms), the reduction of arrears, bad debt and write-offs. All this will be performed while keeping excellent relations to customers and treating them fairly, in accordance with Company policy.
Operational strategy
Without distinction of the size of the firm or the collections department, the collection manager (even if he runs a one-man show) faces continuously operational strategic decisions. From the decision which debt to collect first, which customer to call first, which collection tools to use or to when to shut down a customer’s service, to management decisions such as the structure of the collection team (dedicated department or cross-functional team) or outsourcing of the legal actions.
It is essential to understand that the word ‘strategy’ refers here solely to the way the collection manager plans and organises his operation and not the company overall collection strategy decided by the company management and provided to the collection manager as a part of the collections policy.
When the collections manager comes to prioritise the collection tasks, he faces a number of considerations:
- Should he concentrate on large amounts and prioritise them above smaller ones?
- Should he prioritise ‘fresh’ debt upon older accounts?
- Should he invest most of his efforts on higher risk customers?
- Should he deal first with strategic customers and large firms?
Often, this type of decision is taken at the lowest level of the collectors themselves, and it may lead to wrong or biased decisions. Therefore, the collection manager has to define the collections operational strategy down to the lowest level, and it should be apparent to every collection agents. It is essential that all collection team members accomplish the operational strategy in a consistent way across all customers account.
Collection systems often lack features to support the operational strategy and collection managers needs to heavily rely on tedious excel files to be able to accomplish their strategy properly.
Next article: Collection Policy