Uncovering the Hidden Costs of ARM
3 Introduction
4 Optimizing the Workforce
6 Improving Processes
8 Optimizing Technology Tools
9 Addressing Hidden Costs
10 Conclusion
11 About Waypoint
Table of Contents
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Unpaid debt has a clear negative effect on a company’s
bottom line,1 and this justifies investing in a solid accounts
receivable management (ARM) operation. Whether that
happens in-house or through third-party outsourcing,
the process of chasing delinquent accounts can be costly
and time-consuming. The costs multiply the longer debt
goes unpaid.2
There’s no way around obvious costs like staffing,
benefits, overhead, and infrastructure. The problem is,
depending on how these elements are structured,
additional and unnecessary costs may lie hidden in the
form of inefficiencies and wasteful practices. Indeed,
closer scrutiny of workforce deployment, processes,
and technology tools can reveal latent costs that,
if left unexamined, compound the effort, energy,
and investment it takes to recover funds from among
the more than 77 million Americans with unpaid debt.3
As we’ll see, these problems are not uncommon
in the ARM industry, and consequences run the gamut
from administrative delays and unpredictable cash flow
to inefficient staffing and bad morale. The good news is
that, with a little investigation, organizations can reveal
and remedy these underlying costs. While every business
must formulate its own approach, it’s possible to seize on
some common dynamics to guide improvement efforts.
This eBook looks beyond the obvious costs associated
with collections to focus on underlying inefficiencies
and financial liabilities that may go unnoticed. We place
special emphasis on three overarching factors — people,
processes, and technology tools — that cut across the
whole organization and merit special scrutiny in our
attempt to correct problems and shore up the bottom line.
Introduction
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It’s no secret that staffing — including salaries, benefits,
training, and recruitment — represents a sizable chunk
of any organization’s financial burden. In the ARM
industry the pressure may be greater, considering
the intense training and skills reinforcement required
to keep pace with constantly-evolving regulations
and ever-growing channels for customer engagement.
Especially for businesses managing their own accounts
receivable teams, where collections might not be a
core competency, this can lead to more problems
around recruiting, training, and retention.
Against this backdrop, turnover is a constant struggle.
Regardless of whether one uses an in-house team
or outsources, continuity is important to managing
costs. Unfortunately, contact centers are traditionally
high-turnover workplaces — and that can mean
lost productivity as new staff take time to ramp up.
However, when we dig deeper into precisely how
workforce assets are structured and staffed, we
find deeper problems that can, at once, be systemic
and unnecessary.
A Rigorous Approach to Rightsizing Rightsizing typically implies getting the right number of
people making calls at the right time. But when we look
more closely into rightsizing specific skills throughout the
organization — not just for agents, but for administrative,
legal, and other support staff as well — a more complete
picture of organizational costs and how to control them
comes into view.
The rigorous approach to rightsizing involves questioning
where and how an organization is under-utilizing or
over-utilizing any number of professional roles within the
ARM operation. One might probe, for instance, whether
there are too many attorneys on staff or not enough.
A further drill-down might reveal whether some legal
tasks could be assigned to paralegals or legal clerks.
This process, in turn, can lead to additional questions
that may be highly nuanced, but nonetheless
mission-critical, to the organization.
“It’s easy to ask why we’re using a lawyer with 20 years of
experience when, on the surface, it seems like something
a paralegal with five years of experience could handle,”
explains one industry veteran. “But what if we take that
too far? Given the regulatory environment we’re
operating in, are there times when we’re safer keeping
that task with an experienced attorney to minimize risk
of a compliance violation?”
Optimizing The Workforce
“ …rightsizing involves questioning where and how an organization is under-utilizing or over-utilizing any number of professional roles…”
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Management Issues Where and how managers are positioned and trained
in the organization is especially critical. It’s a challenge
to find, onboard, and train managers who have enough
career experience to do the job — but who nonetheless
update their skills continually to keep pace with
ever-changing regulations and industry best practices.
As with attorneys, managers must be fully current
with the latest regulations and compliance pitfalls.
And their soft skills in managing both agents and
customers have to incorporate the latest industry
trends around collaborative problem-solving, active
listening, and optimizing call flow. In addition, managers
have the added burden of overseeing an expanded,
omnichannel universe for customer engagement that
goes well beyond that initial phone call.
Indeed, the old-style team leader in a traditional
call center would quickly drown in a modern ARM
operation of diverse touch points and channels
involving phone, letter, text, email, and web portals.
With each new channel comes more opportunity
for successful resolution, and more potential risk for
compliance violations and customer service faux
pas. Managers must be channel-literate and also
grasp the sophisticated data and analytics needed
to navigate omnichannel success. And of course
they must be able to coach and nurture subordinates
on all of these skill sets.COMPLIANCE REGULATIONS
AGENT CUSTOMER
MANAGERS
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How processes and procedures are managed is closely
linked to, and just as important as, how the workforce
is structured. For every obvious question, such as
“What’s the best time to make calls?” — there are
deeper questions to explore, such as “Which reports
are useful, and which are unnecessary?” and “Was
that pleasant-sounding 12-minute talk-off really
a success if it requires four subsequent follow-ups
resulting only in partial repayment?”
For many receivables operations, a closer look at
processes — and whether they’re driven more
by logic or tradition — may uncover multiple
inefficiencies. Stamping out operational inefficiency
is especially important for any organization looking
to grow or expand because process headaches
are guaranteed to scale up along with the
business operation.
“Total Cost of Resolution”Business students don’t get far in their studies before
encountering total cost of ownership4 (TCO), a
bedrock financial principle that considers indirect
costs (such as operating a car) along with direct costs
(such as buying the car to begin with). Consider
extending this logic to the collections process for
what might be called the “total cost of resolution.”
The previous scenario about the 12-minute talk-off
that required multiple follow-ups is a perfect case in point.
A cursory look at talk times and resolution rates may
benefit from a deeper analysis — aided by advanced
analytics — of exactly how many follow-ups happened,
which channels were used, and what percentage of
that effort was spent by agents vs. call center managers
vs. attorneys. “It’s not that operations executives aren’t
aware of these additional costs,” said an industry
veteran. “The challenge is that the primary focus is
on client-reported results, especially in champion-
challenger competitions. If additional calls or contacts
are required to fulfill the reported numbers, they can
often get overlooked in the general program workflow.”
Added scrutiny and measurement can reveal the real
costs of all interactions — the total cost of resolution —
and the process improvements that might bring
down these costs.
Improving Processes
“ Stamping out operational inefficiency is especially important for any organization looking to grow or expand because process headaches are guaranteed to scale up along with the business operation.”
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As complex as these analyses might seem, the root
cause of inefficiency frequently comes down to a
simple and very human dynamic: the tendency of
people to want to do things the way they’ve always
done them. This adherence to tradition can make
workers blind to process improvements now
possible through new technologies and smart
strategic planning.
For instance, maybe the equivalent of three full-time
employees are busy with manual invoicing, even
though such work can be easily automated.5 Or perhaps
developers are wasting time maintaining old-style
productivity reports that never get used because the
organization’s new analytics architecture is producing
better and faster insights.
Another enduring pitfall is excessive points of
intermediation in the review or decision chain.
“I’ve seen situations where a COO may ask for a
report on, say, portfolio liquidity rates vs. customer
satisfaction,” explained one veteran ARM executive.
“But once generated, that report has to be vetted
through a supervisor, director, and maybe a VP before
it lands on the COO’s desk a week later. That’s a waste
of both time and money.” Establishing alignment
and confidence in report data, streamlining reviews,
and implementing real-time report publishing
options can help.
Ultimately, leaning too heavily on cumbersome
or outmoded legacy processes can be costly to
businesses. And there’s often little more justification
for obsolete processes than the fact that “it’s always
been done that way.”
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Optimizing Technology Tools
Choosing and implementing the right IT tools is a
challenge in even the best of circumstances. There are
many competing technology options on the market, and
many internal choices to make about budget, capabilities,
security, and how to balance on-premises capacity with
cloud solutions. Other tasks involve standardizing data and
linking disparate systems and databases, perhaps involving
multiple file formats and multiple languages.
Legacy System DrawbacksUnderlying all these priorities, however, is a fundamental
consideration that’s often overlooked. No matter how
strong the need to upgrade performance, many ARM
operations struggle to say goodbye to their legacy IT
systems — even though such systems are known
obstacles to the very capabilities being sought.6
“People tend to stick with legacy systems because that’s
what they’re used to,” observed a longtime collections
executive. “But what are these systems really costing you?
When you look at the licensing, maintenance, and
performance limitations, you start to see that investing
in legacy technology is like investing in a Band-Aid®
instead of investing in agility.”
Today’s requirements for omnichannel capabilities further
heighten the focus on capacity and performance. IT
systems must be powerful enough to support real-time
and self-service functionality, while providing the right
analytics architectures and processes to capture data
for reporting, insight, and decision support.
Legacy systems struggle to support the volume,
velocity, and complexity of modern data, and such
systems are frequently difficult to scale. Furthermore,
the fact that legacy architectures have been built over
the course of what may be decades is a dual challenge:
People feel invested in the legacy environment, even
as that environment has grown more complex and
unwieldy through years of incremental enhancements.
“ There are many competing technology options on the market, and many internal choices to make about budget, capabilities, security, and how to balance on-premises capacity with cloud solutions.”
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1 Workforce Improvements
Focus on rightsizing that goes beyond typical
assessments of labor costs or even common
productivity measures like discounted cash flow
analysis7 to calculate the precise cost of unpaid debt.
Your rightsizing mission should encompass all
organizational roles and how best to staff and structure
those roles. Furthermore, ask the right questions of
your management team: Do supervisors have the
appropriate level of experience? Are they breaking
down silos and putting enough centralization in the
right areas? Do they cling to legacy skill sets that
aren’t current? Can they work with behavioral data
and analytics reports? Comprehensive questions and
honest answers will pave the way to cost reductions
and better productivity in the workforce.
2 Process Improvements
Audit processes to remove unnecessary work
or bloated hierarchies for reviewing reports or
making decisions. Abandon tradition in favor
of logic in evaluating and setting procedures.
And make sure the changes you implement can
scale with the business. Most importantly, learn
to tell the difference between one-time anomalies
and systemic problems. Spending too much
time retooling processes for something that
probably won’t happen again can be just as
wasteful as failing to fix process breakdowns
that keep recurring.
3 Technology Improvements
Thoroughly question your legacy systems and calculate
the true costs— including upkeep, security, licensing,
and latency of information availability. Based on that
assessment, consider options—including replacing
an entire system, optimizing current technology, or
switching to an external provider. Embrace agility by
framing needs around the business problems at hand,
instead of specific requests for specific technologies.
And make sure that whatever systems you use are up
to the job of supporting modern demands for seamless,
omnichannel engagement with customers and can
provide the analytic heft on the back end to process
behavioral data for insight and competitive advantage.
Addressing Hidden Costs
Once the hidden costs are laid bare, what’s the best way to go about mitigating them and building a stronger and more efficient collections operation?
Here are a few priorities to keep in mind for each of the three focus areas:
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Probing into hidden or unexamined costs can lead to deeper insights and more opportunity to improve ARM
operations and the bottom line. Regardless of whether the focus is on people, processes, or technology, many
solutions involve questioning assumptions about how things have been done before. This culture of questioning
the status quo and asking how things might be done better should permeate the entire organization, from the
CEO all the way to the front-line agents and support staff. When that happens, all the costs of doing business
come into view — and the organization’s bottom line benefits as a result.
Conclusion
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End Notes1. http://www.inc.com/guides/2010/06/how-to-improve-cash-flow.html2. https://hbr.org/2009/05/need-cash-look-inside-your-company3. http://www.urban.org/research/publication/delinquent-debt-america4. http://www.investopedia.com/terms/t/totalcostofownership.asp5. https://www.paystreamadvisors.com/resource/2016-invoice-workflow-automation-report/6. http://deloitte.wsj.com/cio/2013/10/01/when-companies-become-prisoners-of-legacy-systems/7. http://www.investopedia.com/terms/d/dcf.asp
Waypoint Resource Group is a 100% US-based company
and a member of the Trellis family of companies.
Waypoint provides multi-channel accounts receivable
management solutions to businesses in a variety of
industries including automotive, utilities, healthcare
and telecom/cable/satellite. Trellis Company (formerly TG)
has nearly four decades of successful experience in
accounts receivable management as a federal loan
guarantor. Waypoint draws from this experience and
heritage to deliver results that improve revenue flow
and recovery as well as safeguard consumer relationships.
Contact Waypoint at (888) 648-6606 or www.waypoint.com for more information.
About Waypoint