Guide Summary

• Rising issues have been identified between obtaining payment though internal and specialist recovery without alienating a current and potential customer base.
• Credit Management and Debt Recovery don’t traditionally result in customer retention. This paper sets out to explain why brand is important to strike this balance.
• Applicable to all business and industries ranging from SME’s and PLC’s which the scope of discussion is.
• A quick guide of what to consider and how to approach brand vs collection both internally and through use of a debt recovery agent.

Background

Debt Recovery is evolving. In recent years we have seen the Debt Recovery industry turn to utilise marketing tact as a method to engage debtors and obtain payments. This has surfaced in creative written communication, channels of correspondence and utilising the internet to the best of it’s ability, creating a 24/7 collection culture.

It will come as no surprise that the reasons for this change in tact is partially due to the guidelines initially set by the Office of Fair Trading in a bid to set debt recovery agents as well as their reputation on the straight and narrow whilst implementing relevant protection for consumers entering into the debt cycle. Additionally, and perhaps surprisingly the industry has faced tougher times in which to successfully recover.

This trend is something that although would have been first noticed by Credit Managers and their teams, tends to slip by without solution past existing credit policy; ending up in the capable hands of a debt recovery agent.

Brand is Best. Cash is King

Speak to the Head of Marketing and Credit Manager in any business and they will uphold this statement. Customer retention is not often the result of Credit Management nor Debt Recovery, and so you would expect that the two most certainly do not go hand-in-hand.

Where once upon a time the Credit Manager, Heads of Sales and Head of Marketing did not see eye to eye with an ‘us and them’ culture; working in synergy for the benefit if all is coming to be the new strategy. And rightly so! With the total trade debt for UK SME’s during 2013/2014 standing at £6,300,000,000,000 (Debt Guard Solicitors, 2014) averaging an alarming £1.3m it is evident that there is substantial room for improvement for credit management whilst retaining and expanding an increasingly precious; and with that sensitive customer base.

SME’s face a tough test with such strain on smaller credit teams making many vulnerable, cash-flow is everything, with heavy trade debtor figures the invisible choke hold is placed on the Company; preventing it from growing, impacting human resources and potentially forcing a Company to close.

As the market-place is rife with competition many have concerns about taking the debt recovery route as believe it will drive away business. As a Finance Director, Head of Marketing or Credit Manager ask yourself, is a customer not paying actually a customer?

Not only SME’s struggle with the correct balance when recovering debts from customers. More than ever market leaders share concerns with their smaller market competitor’s when approaching their customer base on the dirty money matter.

It is common for Companies of all sizes to take the softer approach. Steering as far away from door-stop-collection as they can, as quickly as they can and embarking upon the journey to find the right solution.

The Solution

The solution is simple. In such a tough trading environment it is crucial to simply treat every customer with regard. They are sensitive and so require careful handling and tact.

This can be achieved through a combination of efforts including customer service, robust credit management procedures, brand-appropriate collection communications and when all else fails’ debt recovery agents.

Understanding your Business

If the key problem lies with resource then the answer lies in finding a debt recovery agent who understands your business brand and customer base. From this understanding the correct work-flow’s will be established; using the correct channels of communication, identifying the right tone and segmenting your customer base to truly achieve the best result possible.

Seperating Bad Debt from Brand

Separation is also important. Remember your brand is the best! If you contact your customers regarding ‘dirty money’, they will most definitely hold it against the Company and feel personally attacked. It is at this stage of your collections procedure that correspondence should be kept light; especially in the most competitive of markets.

Often a notification is enough to prompt payment; as realistically no payment is the result of a can’t pay, won’t pay customer or a can pay, won’t pay customer. These customers require strategic correspondence, monitoring and record keeping to obtain payment successfully and require an approach that could potentially reflect negatively upon a business if not dealt with externally through a debt recovery agent.

Pass the Buck

Don’t be afraid to ‘pass the buck’ to your recovery agent. This is a great tool for protecting your brand, retaining your customer whilst allowing your agent to essentially do your dirty work and recover outstanding debt. This allows the customer to hold you in the same regard and relate the recovery activities to your agent.

Conclusion

Ultimately the overall message is to align the carefully selected recovery agent panel with your brand and level of customer sensitivity whilst tailoring internal collections processes to prompt payment from late payers, deal with disputes and identify the correct point at which to refer the debt to your agent; ultimately avoiding bad debt write-off and maximising cash-flow to it’s highest potential.