What are the common pitfalls in debt collection?CFOs should make sure they avoid the following debt collection pitfalls at all costs.
- Collections processes start too late
- Lack of customer behavioural insights
What KPIs can CFOs use to evaluate the collections department’s performance?CFOs should keep a close watch over their collections department’s performance at all times. By monitoring the following metrics, they can stay on top of their collections success—and can promptly step in to take action when results aren’t going as expected.
Cash collectedActual cash collected is the most important collections metric for CFOs, showing just how much cash the collections team has collected from its customers.
Cost of collectionsCFOs also need to monitor the cost of collections, including employees’ salaries, recruitment costs, infrastructure, software costs and other potential expenditures. This allows CFOs to accurately determine whether leveraging a collections platform will reduce the overall cost of the collections processes, for example.
ImpairmentImpairment occurs when a company’s asset reduces in value. For example, when an individual owes a company €1,000 but cannot repay their debt. The less impairment a company has, the less provision CFOs need to prepare—and the more capital they can spend on other projects. According to IFRS 9, financial institutions are required to account for expected losses from the first instance that the loans appear on their books. Hence, CFOs need to focus on reducing impairment efficiently and effectively.
The key? To have full control over your debt collection dataMany CFOs wonder whether they should resolve debts internally or externally (such as outsourcing to a DCA). However, the most important factor that helps CFOs optimise their debt collection processes moving forward is to have full control over their collections data. They should gather and analyse a wealth of data that includes customers’ contact information, historical payment history, favourite payment methods, and any key behavioural insights. Having access to this data means CFOs don’t have to worry about allocating debts, and they can choose to either use third-party agencies or resolve debts in-house. CFOs must leverage collections software to gain full control over their customers’ data. The alternative—to manually collect this crucial data—is time-consuming and inefficient. Therefore, CFOs need to partner with software providers whose product boasts the following features:
- Capable of connecting to APIs, allowing collections teams to interact with different data, devices and applications;
- Allows customers to self-serve their debts online without having to talk to agents;
- Provides detailed insights into customers’ behaviour, allowing collections agents to determine how effective their collections processes have been;
- Boost dunning processes automation, reducing redundant processes to boost collections productivity.
Originally posted on receeve