How Collection Software Can Reduce Delinquencies
Electrical World - T and D Edition
By Eric J. Christeson, Chairman,
Dynamic Interface Systems Corp., Los Angeles, Calif.
You may know how many account delinquencies you have, even the total dollar amount involved. But do you have the tools to collect effectively?
Your collection performance depends on the accuracy of information provided by the credit management system. A manual system to keep balances, payment due dates, phone numbers, and notes organized and current can be inefficient, at best. And because the index-card-and-telephone-call method of collecting is labor-intensive and susceptible to errors, the cost of manual collection continues to escalate as utility account portfolios and delinquency ratios grow.
The solution may lie in an automated system that emphasizes speed and flexibility, while providing better collections control. The underpinning for reduced delinquencies and higher recovery rates is accurate tracking of problem accounts, combined with productive telephone follow-up. Both can benefit from automation. The evolution of software technology now makes collections automation for utilities easier to cost-justify.
The principal benefit of an automated collection system is enhanced cash flow, which results from a reduction in the average collection time. Without automation, less time is available to devote to problem accounts, and more of them must be prematurely sent to outside collection agencies. Such agencies typically cherry-pick the easiest loans to collect, while commanding as much as 50% of the revenues. (Interestingly, these agencies have recently reported substantial productivity gains resulting from the installation of automated systems.)
The challenge in automating is finding the right software. Knowing what questions to ask is critical. Here are some primary considerations:
- Conduct a needs analysis. How do documents and work currently flow through your utility? What are the most significant problems?
- Look for hidden costs. A system's ancillary costs can exceed the initial outlay. For example, what will upgrades cost? Will your computer need to be modified? What about a backup system, training, expenses, etc.?
- If possible, get the software first. Don't buy software simply because it fits your current hardware. It's easier to find compatible hardware than to find software that both meets your needs and is compatible with existing hardware.
- Choose short-term solutions for hardware and software. Collection technology is evolving too rapidly to commit to long-term solutions. Make certain that software operates on readily-available hardware. Ask for a demonstration on a hardware platform before buying.
- Flexibility and control are important. You should be able to customize specific procedures. For example, you may want to send letters at 15 and 30 days past due before calling a customer. But when conditions dictate, you may wish to shift to a 10-day contact. Will the software allow you to do that?
- Is the software expandable? Modular programs are best for integrating other software, such as credit origination or tracking programs, or for operating on a network. Review a software's features to determine which are useful and which are superfluous.
- What about support? Look for a strong manufacturer commitment to support. If they don't brag about it, they probably aren't serious. Phone support is critical and will be your primary source of problem solving. Make certain it is available during the hours covering your needs.
Give the right impression
The search for collection software system that best meets your needs can be exhausting and confusing. Adopt a pragmatic approach to evaluating your needs and how the software programs meet these needs. The right software, combined with a consistent support program, creates a sense of professionalism and aggressiveness in your utility, a sense of urgency among delinquent customers, and a significantly enhanced cash flow.
Copyright © Electrical World - T and D EditionReprinted with permission.