In our previous blog on “Part 1 – Smarter accounts receivables collection strategy improves collection rate by more than 15% and reduce delinquency rate by 50%”, we learnt how IBM Smarter Collection Strategy takes into account end to end collection process, generating insights from past customer behavior including payment pattern, claims, deductions and judging the credit risk associated at a customer level. And now in this part we will be sharing the important elements of the collections strategy, which makes it unique for clients.
Smarter collection strategy embeds technology, tools and analytics into collection process acts as solution for the process limitations. There are four components to IBM Smarter Collection Strategy which acts as a differentiators:
- An integrated Approach – Joint Ownership of Collections Operations & Analytics
IBM helps its clients in providing an integrated approach where there is a joint ownership for the collections operations and analytics component. Analytics team becomes an integral part of operation and analytics drive collection process related decision like, contact strategy, escalation, agent allocation, agent productivity, escalation. Data Analytics is embedded into all decision made in the collection process. IBM helps clients in using analytics for business insights and driving financial efficiency to continue to outperform peers across all phases of economic cycle. This gives a better view and control over factors impacting collection performance and achieving the defined target becomes easy.
- Dynamic Strategy Management
Strategy which is a contact schedule describing customer to be contacted, mode of contact, priority attached to the customers. This strategy needs to be dynamically managed to ensure rigor over time. This Dynamic strategy management is critical as these schedules are built based on past payment patterns. These payment patterns are significantly influenced or biased by the past contact strategy. IBM works with collectors who are closer to the customer and helps in reducing this bias. Periodic evaluation of the performance through dynamic strategy management helps in ensuring relevance of the strategy to changing nature of the portfolio.
- Collaboration with Process Experts
Under Smarter collection strategy, collaboration among the process teams and analytics delivery is a key component. Through collaboration the insights are incorporated. Analytics engine might identify a customer as high risk and recommend for frequent follow up and calls. Inherent process gap or customer challenges driving these behaviors are discovered. Accounting for behavior illustrated by the customer collection strategy is customized and it’s more than just follows up from process teams. This ensures control on aged AR and effective utilization of available resources in process teams.
- Implementation of Recommendation
Most important factor in achieving desired outcomes using analytics intervention is successful implementation of the strategy. Under smarter collection strategy implementation is closely tracked and driven by analytics team along with process owners. Implementation effectiveness is tracked at daily, weekly and monthly level at collector, risk and value segments. This tracking is leveraged by analytics team to provide clear focus area for process owners to drive effectiveness of implementations.
Sharing examples of some of our clients across Industries who have achieved improved collections performance by higher cash flow, lower delinquency rate and controlled aged balance with IBM’s Smarter Collection Strategy:
A Global Service Company achieved higher collection performance by 15.0% which translated into 15M additional cash collected over 3 years of managed service. 50% reduction in delinquency rate was achieved by driving and maintaining the change in customer payment pattern driven by analytics & change intervention. Customer behavior changed and early payments were achieved, so for low risk payment due date of payments was reduced by 71%; for medium risk by 29% & for high risk by 3%. Driven by change in customer payment behavior, risk mix also improved: low risk customer improved by 29%; medium risk improved by 6% and high risk reduced by 12%.
Global Document Management Company achieved 50% reduction in delinquency comparing year on year despite worsening economy & shrinking balance across countries.
A Publishing Company showed 4% improvement in collections, converting to 2.8M additional cash collected in a Quarter.
Maintaining cash flow is a critical component of running a business successfully. The focus should be on ensuring that sufficient cash is available for investment by not tying up cash in stock unnecessarily or putting procedures in place for chasing up outstanding debts and controlling different levels of cash outflows in relation to the size of the business.
For more information contact Muthu Mangai Muthiah, IBM GPS Advanced Analytics Delivery Leader (firstname.lastname@example.org) or Kamalesh Karanad, IBM GPS Analytics as a Service Offering Leader (email@example.com)