Best Practice #4: Well-Defined Collection Strategies

For a system that you will have to fall back on several times over the course of your business career, your need to have tried and true but more importantly clear cut and solid strategies and policies in place for everyone to follow. Policies and strategies such as this exist for the sole purpose of directing your employees’ actions under certain circumstances and guiding them on how to respond when things change. Having a good plan is critical to the overall success of the unit, even if that plan has to sometimes be altered on the fly or not used at all.

The first and most important policy to formulate for your collections team is how they are to initially contact past due clients. There are so many ways to go about it, there needs to be a guide that determines which tactic is most effective and when. Should the team contact them through phone, email, or a written letter, and how many days past due should first contact be? Moreover, you’ll need to lay out the rest of the procedure as well, such as how and when second and final contacts should be carried out. This is one of the most important strategies to formulate and clearly define for your team.

You will also need to set up policies for the handling of risk based collections. A lot of things can happen during the process that affect how it needs to be handled. Sometimes the client has suffered personal tragedy, and in that case your agents may need to approach them differently. You may also encounter issues with client excuses, clients unable to be contacted, and other problems and obstacles that you can’t expect to be part of the normal process for a collections officer. You need to lay out strategies and policies for your employees to use when these obstacles arise, in order to handle the situation as efficiently as possible.

You’ll probably also want to use a strategy that divides your clients into segments. Knowing your customer segments is a critical aspect of running any business, and it is exactly so for collections as well. Having different types of clients divided into groups that match the criteria you have set will make it easier to predict how they will be dealt with whenever particular situations arise. What criteria you use is completely up to you, but the most common criteria are location, solvency, ability to pay and attitude.

In the end, these defined strategies and policies will never be one hundred percent full proof. They will often need to be altered on the fly as situations change, but that doesn’t negate the useful nature of having a plan in the first place. Whether or not a plan is used it is always prudent to have one in place as the default method of reaction to obstacles and issues. How you go about establishing those strategies and policies is key to their success.

Laura Castello

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