Blog: How technology will fettle collections: A day in the life of a collections analyst in 2020
Cash-flow forms the heartbeat of any organization. Without continuous access to secure working capital, it gets difficult for any business to operate efficiently on a daily basis. If we talk about the long-term effects of poor cash-flow, it can hamper more than just the operational efficiency. Poor cash-flow can affect the relationships with suppliers, increase the stress of the employees, and might even cause the business to miss sales opportunities. All in all, the efficient collection of debt is extremely vital as it ensures that the sales are converted into cash as seamlessly as possible. Yet, many organizations, to this day, rely on an extremely labor-intensive process for managing collections.
The collection process for many organizations still involves:
- running a daily debt report,
- exporting the report to a spreadsheet,
- manually compiling the list of debtors to be contacted.
In case there is a collection team at work, the whole information needs to be split between different team members — this leads to the information being highly fragmented and siloed.
However, the last couple of decades have seen significant improvements in the collections process. For instance, we now have accounting systems that include an Accounts Receivable module that eliminates the need for maintaining a manual ledger. Further, these modules are enhanced with features that support management and collection of overdue debt. These features include account overview screens that present a wholesome view of the account, calculation of collection metrics (like DSOs, last payment date, number of broken payment promises, and such), and capturing the collector notes.
Have all of the above features made the collections process much more efficient and seamless? Well, yes, and honestly, that is great! However, technology has grown beyond that, and it still feels as if many organizations are still fiddling with software and processes that were available in the early 2000’s.
As an example for this, look at the Advanced Collections Module released by Oracle as a part of their E-Business Suite, approximately 15 years back. This module supports debtors scoring, the ability to generate batch communications (in the forms of emails or letters), and even automation of collection strategies, and the ability to generate batch dunning communication (e.g. letters, emails). However, little has changed since the module’s inception. So, if you were to use the same module today, you’d probably be using features that haven’t seen any major improvements in the last 15 years.
Further, most of the collectors and collection analysts still need to be tied to their computers for maximum efficiency — whether it is the office desktop or a laptop that connects them back to their company network. As a result of this, the collection analysts need to be manually prepared if they wish to review the customer’s account onsite. That is, they’re required to be equipped with debtor reports, invoices, and even account notes — all of this before visiting the customer. In comparison, they have instant access to personal information using their mobile phones or tablets.
The last five years have seen a major paradigm shift in the technology landscape, which, if harnessed, could completely overhaul the collections process. The likes of mobile applications, Big Data and analytics, Artificial Intelligence and Machine Learning, and even blockchain have been widely embraced and appreciated, and these technologies are known to work! The amalgamation of collections with these technologies will give this world a timely makeover.
Let’s look at how these technologies, combined with the required human skills, can fettle collections, and ease the life of a collections analyst:
Big Data Analytics
Information is the most powerful arsenal in any collections process. Big Data Analytics helps in acquiring the most pertinent information on customers. Even the most basic information like the customer’s demographic data or the time of the day when they’re most likely to respond to a call makes a mighty difference in the way the collection call will go through. Big Data makes it possible to acquire and segregate data while keeping a laser-sharp focus on a singular debtor. This is an advantage that was With Big Data, it is possible to acquire and segregate data with laser-sharp focus with respect to one singular debtor. This is an advantage that was hitherto not available for most collections analysts.
Big Data makes it possible to perform speech analytics in the collection calls. It helps in listening and monitoring all the calls — a feat that was neither possible, nor recommended humanly. Inputs from speech analytics help in saving up a lot of money on training and operational efficiency.
Predictive analytics is a form of advanced analytics and is making tremendous breakthroughs in the collections process. It engulfs various techniques including data mining, artificial intelligence, machine learning, and statistical modeling to make near-correct predictions about future events. Thought it might sound extremely enigmatic, it has shown clear results in the field of collections. WNS, a leading utility company, has improved their debt collection by 50% using predictive analytics. This improvement happened over a period of three months with zero loss of customer interaction. Further, it was also possible to develop improved strategies based on the inputs from predictive analytics.
Process automation isn’t something entirely new, it has been around for a while. Many activities that were manually done are now replaced by a self-service portal or automated process. The most common processes that are automated are skip tracing, payment follow up, and listing phone numbers for calling. Data science helps in sourcing the data and automation does the rest!
The latest trend in collections process is decision automation, which involves training a machine to think, plan, and act like an agent handling the collections. As you’d have guessed, this uses Data Science to build models based on past history of debt collection. Then, these models are employed to teach machines how to interact, follow up, and even close pending collections.
The ubiquitous gadget of the 21st century — the mobile phone — is a friend of collectors and collections analysts. It helps them in reaching debtors wherever they are and is one of the most resorted ways of closing the collections. The personal nature of the device also adds to discretion. Another trend that is coming to light in the recent years is debt collection via payment apps. The most appreciable aspect of these payment apps is that they completely eliminate all the chances of fraud. These apps are designed to help the collectors communicate directly with the debtor, or vice versa — thereby providing utmost transparency.
The current way employed by credit card companies for storing personal information isn’t at all transparent and is susceptible to hacking. On the contrary, blockchain — which is decentralized — is much more secure, transparent, and harder to hack. This means that it makes it extremely easy for collections analysts to keep track of what is true and what is not — basically, who has signed and paid for what and when.
This largely improves customer trust and is a benefit that cannot be ignored. Due to the sheer amount of data breaches happening in the world today, customers might be wary of providing alternative methods of payment. Because blockchain technologies are decentralized, it is almost impossible to tamper the system. This bolsters the security aspect of these systems and strengthens the trust among the customers.
Blockchain can definitely change the way collections are carried out. This gives customers the power of choosing when it comes to getting credit. P2P lending is one fine example of this. Its aim is to establish a peer to peer, digital community that has fewer loss factors and more on-time payments. As this gets more mainstream, it will definitely have a positive impact on how businesses score their customers and reduce the chances of bad debt.
All in all, the technologies we discussed above have the potential to completely change the face of collections, and thereby the job of a collections analyst. The collections process, which was traditionally largely human-centric and exhaustive, will become extremely seamless and transparent owing to these technologies. This change will, to quite an extent, simplify the day-to-day job of a collection analyst. They will no longer need to hunt for data in large stacks of papers or even spreadsheets. These technologies will give analysts access to all the required data, at their disposal, at all times, which will ensure an improved analysis of debtors and speed up the cash-flow process.