Customer Experience and Collections

Ideas to generate improved customer experience from the collections process

THE CUSTOMER LIFECYCLE

Effective management of Accounts Receivable (AR) requires process management and control across multiple elements of the customer lifecycle. 

Together these elements represent the Risk Operations lifecycle. Managing each is critical to drive results, maintain controls, and balance with customer satisfaction.

Fig 1:  Risk Operations Lifecycle

One key element in this control process is Collections which exists downstream, at the end of the customer lifecycle.   

Its primary role is to recover unpaid revenue and minimize loss to the company.  However it also plays an often overlooked, but pivotal role in increasing customer satisfaction and improving the customer experience.

In order to understand this we must first consider in more detail the collections process.

THE COLLECTIONS LIFECYCLE

Fig 2:  Collections Lifecycle

The Collections process can also be thought of in terms of a lifecycle or a flow of accounts.

This flow is the basis of Roll Rate Reporting: a critical tool to understand and manage collections performance.

Typically, customer accounts without payment, will roll from current (up to date) status, to past due, to suspend, to cancel and then to recovery.

At each stage of this lifecycle a proportion of customers will hopefully be persuaded to pay (and stay) thereby reducing the volume that flows downstream.

KEY INFLUENCES ON COLLECTIONS

Given its position at the very end of the customer lifecycle, collections is heavily influenced by upstream processes.

Acquisition strategy, product rate plans, promotions, disputes, process issues will all have an impact on the collections process.

The exact nature and mix of variables depends on the industry.  For example

Consumer products with high degrees of billing complexity (such as credit cards and telecommunications) will have higher volumes of disputes, than those without this complexity (for example mortgages).

Disputes and other variables become important in relation to customer experience in this process.  It links intrinsically to the issue of withheld payments.

IMPACT OF WITHHELD PAYMENTS

In some industries, significant collections volume is not solely driven by true ‘cannot pay’ bad debt, but also by ‘will not pay’ disputes. 

Customers, who cannot get issues resolved, sometimes simply withhold payment.  In many cases this is a call for help from the customer.

As customers continue to withhold payment, these accounts, together with others with similar issues, fall into collections. 

As the accounts age, if issues are not resolved, they become increasingly concentrated and visible within the collections process.  It is a microscope on customer dissatisfaction and upstream broken processes. 

The collections process is therefore in a unique position in the customer lifecycle.  It holds extremely valuable customer experience insight for any business to leverage.

SOLVING CUSTOMER ISSUES

A key challenge with this particular insight is the connotation associated with the word “Collections”.  It is highly emotive and not always associated with “helping me solve my issue”.

Indeed many customers get frustrated their issues have not been resolved and this ‘boils over’ once a collections call is made.  It is a difficult situation for the customer and employee alike.

In all too many cases the strategy adopted is to simply delay calling.  Without action, this strategy ‘hopes’ the customer will simply accept the situation and pay.

Unfortunately, this approach is rarely successful. 

  • It results in larger balances for customers, compounding the issue; increasing Collections volume and weakening AR controls.
  • Or, if the customer does pay, the original issue is not resolved.  This is not forgotten by the customer resulting in more dissatisfaction.

Ironically delaying customer contact can actually generate the customer retention risk it was trying to avoid.

Reframing the collections process to solving customer issues can help improve customer conversations, and provide valuable customer data for companies to improve customer experience.

This results in a better customer satisfaction as well as improved collections performance. 

IMPROVING CUSTOMER EXPERIENCE

There are five key steps for using the collections process to drive improved satisfaction.

  1. Control the delinquency setup criteria.  Balance when a customer is called with customer disruption and financial loss.
  2. Quickly separate ‘will not pay’ from ‘cannot pay’ customers.  Address with separate work streams wherever possible.
  3. Ensure collectors have a mindset of customer issue resolution.  Draw the linkage to improved collection results.
  4. Log and record all ‘dispute’ and process issues centrally for analysis
  5. Provide a robust feedback loop for analysis and upstream process fixes.

The two last steps, the creation of a feedback loop, is critical.  It provides hard data for businesses to highlight and quantify dis-satisfier issues.  This enables process fixes with the following benefits:

  • Improved customer satisfaction
  • Reduced collections volume
  • Increased workforce capacity for non-pay issues
  • Improved AR and Bad Debt performance

CONCLUSION

Understanding and investing in the Account Receivable process is an important element for maintaining business health.

The collections process, within the AR process, can provide invaluable intelligence on key customer dis-satisifiers and upstream process issues.

Establishing a robust analysis and feedback structure in collections can help improve customer satisfaction, reduce attrition and also improve financial performance.