Collections is the process of obtaining owed monies from customers who have, for whatever reason, fallen outside of their contractual duties in such a way to maintain good customer relations while minimising bad debt losses through the effective use of resources. The above definition of collections encompasses the following key components:

• Good customer relations – maintaining the balance between the activities of assertive collections and aggressive collections
• Minimising bad debt losses – ensuring collections, from a strategy perspective, are designed to optimise bad debt losses
• Effective use of resources – ensuring all resources (system, human, operational, etc.) are optimised to maximise collection efficiency/productivity while maximising resource availability

Each of these key components of collections comprise their individual challenges, approaches, and solutions. This blog is the first of three parts that will focus primarily on maintaining good customer relations.

With increasing inflation, rising interest rates, and greater austerity measures in place, financial stress is on the rise, resulting in more and more ‘good’ consumers who have the willingness to pay, but not the ability to pay. This, coupled with stricter guidelines from regulators, further necessitates the need for effective customer communication and for the maintaining of good relations.Therefore, when a collections agent has a conversation with a customer who has missed a payment(s), it is imperative to consider the following:

• The customer is speaking to the lender (the organisation) and not the collector (an individual) so the collector needs to represent the organisation accordingly
• For customers to take collectors seriously, collectors must be empowered to make decisions and offer solutions. Once contact is established, the collectors need to build trust with customers in order to reach a mutually beneficial solution where communications are maintained and monies are paid. In all likelihood, the customer has outstanding obligations with other borrowers and establishing such trust will enhance the probability of  getting paid ahead of others
• Collectors will typically spend three to five minutes on the call with customers. During this time, collectors need to be adequately skilled/trained to cover key elements of the call: establishing contact, extracting the reason for non-payment, negotiation, and recapping the conversation to get a clear commitment.

Addressing these considerations require collection agents to be sufficiently skilled in the following key areas:

• Listening – assertively listening to customers allows collectors to understand the customers’ circumstances and negotiate accordingly. Often collectors are overly aggressive which leads to a lose – lose situation. Illustrations of poor listening include interrupting the customer while they are talking, not demonstrating empathy when required, and not taking notes for future questioning at appropriate breaks
• Conversing – customers will paint mental pictures of collectors based on their conversational skills. In order to achieve the appropriate ‘picture’, the vocal style of collectors must portray confidence, control, and assertiveness. More often than not it is the way words are spoken which has the impact, not the actual words themselves. Therefore collectors should master their vocal style (tone, pitch, energy and rate to name a few)
• Questioning – The types of questions asked allow collectors to extract necessary information, details, and confirmations from the customers. Asking appropriate questions through various stages of the conversation is essential to achieving this. Examples on the types of questions include open questions that allow customers to talk, closed questions utilised to confirm facts, and leading questions that confirm commitments
• Assertive Behaviour – There is a fine, yet critical, line between assertive behaviour and aggressive behaviour. Aggressive behaviour is where the rights of the customer are violated and should be avoided at all costs as it often leads to a diversion in the conversation. Assertive behaviour, on the other hand, is achieved through maintaining control of conversations, never taking what customers say personally, preparing for every case, and using the right language
• Negotiation – while representing the organisation, collectors need to ensure an outcome from the conversation that is beneficial to the organisation. This negotiation skill improves over time and is dependent on collector abilities. To successfully negotiate and reach a win-win situation, collectors needs to know what they want, know their customers, adequately prepare for every case, build trust, and structure the negotiation process

Mastering the above skills allow collection agents to transform themselves into professional collectors, improving customer relations, reducing bad debt, and maximising overall profitability of the portfolio through an enhanced customer experience.