Where is the biggest opportunity to collect money in the collection files you work daily? Hint; It’s not in the high scoring accounts

Any decent agency or law firm can collect the easy to collect accounts, the cream. The servicers that stand out are the ones that can collect the rest of the portfolio. The agencies and law firms that can collect the accounts others can’t or don’t collect. Well, you may be saying I know that, but I bet you don’t know this.

The secret is segmentation! Segmentation is “divided into segments” which is how you collect the whole portfolio. The secret in segmentation is the precise process for each segment identified and segmented. Let’s talk in smaller words, small balance, debt settlement, not suit worthy, disabled, veterans, large balance, fixed income consumers and on and on. These are the segments you must find in your portfolio and then create a strategy around that segment. Let’s look at two examples debt settlement and small balance.

Small balance accounts are easy to identify, unlike debt settlement accounts so we will look at this process first. First, we must define the segment or define what a small balance account is, let’s assume it is less than $150 in total balance. So next we need to determine a strategy that is cost-effective in which to work this segment of accounts. Depending upon the client, we may choose to only send one letter and call this segment only with an IVR application. I may limit the amount of calls, whether by the IVR or a live agent. Also, depending upon the client you may append that account with more data in order to determine a subset of accounts that may be more likely to pay. In each of these instances I have to take into account their cost to work the account versus the actual return on that work.

So let’s consider a more intricate process the identification and segmentation the Debt settlement accounts. First the accounts must be identified as being handled by a debt settlement company. Your agency or law firm must also have a clear strategy for these accounts once identified. Most agency owners are law firm managing partners have no idea that accounts are being identified and settled by collectors within their staff. A large majority of the identification of debt settlement accounts Is done when a debt settlement agent sends a list of accounts to a bill collector within an agency or law firm. In most cases this is not a clear strategy from management it is a clear strategy from a smart bill collector.

The larger companies have a debt settlement strategy and generally have a person or department that handles those accounts directly with the debt settlement agent. In these cases the strategy is clear or at least communicated to the staff. Once the accounts have been identified whether body collector method or by a company strategy, there must be a strategy around how and when those accounts are settled. Many of the larger banks have clear policies regarding any accounts identify is that so account within their placed portfolios, for example, some banks require the servicer to return the account of them as soon as it is a device as a debt settlement account. Others have clear defined percentages they will expect from debt settlement agents.

By having a clear strategy to identify segments of the portfolios you are working and creating well thought out strategies for those segments is how you collect more money than your competition. In order to set yourself apart from the company you are competing against you need to learn how to segment as many sections of your portfolio as possible and build strategies to combat the difficulties with each segment.

If you need help defying segments and building strategies contact me at Lighthouse Consulting.

Phillip W. Duff,  CEO Lighthouse Consulting 904-687-1687

Phillip W. Duff

Phillip W. Duff the Founder of Lighthouse Consulting was trained in Six Sigma while working for Bombardier Capital in 2001, and is highly successful helping organizations improve their processes using the Six Sigma methodology. Mr. Duff has consulted with numerous companies over the last 10 years and has shown the ability to enact cultural change in a company. He has also initiated programs proven to drive positive revenue growth both as an employee and a consultant. His focus is to help CEO’s with a focus on growth. His knowledge of technology and background in debt collections have combined to help companies automate processes and identify which processes provide profits. Mr. Duff has also developed a unique process of initiating cultural change as a part of developing a revenue-driven atmosphere in a variety of formats. This unique philosophy and technique are unseen to date. His substantial experience in the collection industry, Six Sigma core competency and extensive industry relationships can provide you and your team a matchless perspective into your accounts receivable business or any business strategy.

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