Experian’s quarterly Business Benchmarking Report released numbers for Q3 showing the percentage of dollars severely delinquent (91+ days past due) has increased by 15.8 percent compared to September 2010. This goes to show why businesses are struggling with their debt collection efforts. 

 How do you know if you are getting the most out of your collections strategy? 

Wouldn’t it be nice if you knew exactly when one of your uncollectable accounts freed up some capital?

In my previous blog, I discussed the traditional use of commercial triggers for portfolio management purposes. However, many businesses are using triggers with their collections teams to get paid sooner.

 Commercial triggers offer notifications on balance change decreases, which from a collections standpoint means your delinquent customer is paying other vendors. Why aren’t they paying you? A new inquiry or a new tradeline trigger also indicates that the business is actively establishing new credit relationships which is an indication that they remain credit active.

Additionally, some traditional triggers used for portfolio management can also be used for collections.  Score change triggers as well as days beyond terms triggers can track positive payment performance indicating your customer is in a better position to pay you.

So while the business landscape may not be changing anytime soon – this doesn’t mean your collections strategy shouldn’t change either.  Work smarter not harder and get paid sooner!

In my personal life, sometimes I feel like I am the last one to know about major life changing events that impact my family or friends.  If it wasn’t for social media sites, how else would I have known that Jack and Jill are now separated and that Katie & Kyle just got engaged?  Back before social media existed, you would need to actually pick up the phone and call someone to hear about a major “life event” like that. These days, personal information is painted all over social media sites and is more readily available than ever before.  

 Have you ever thought to yourself – Is too much information ever a bad thing? Is it better to ‘know’ or ‘not know’?  Well, I’d have to say – that depends on what it is! But when it comes down to events that impact you or your business –it is better to be “in the know”.

 In the business world, your customers are not going to pick up the phone to tell you they had a major “business event” change. So do you have the right safe guards in place that are going to tell you what major business events are occurring with your customers? Many businesses utilize services that provide customer updates or “triggers” from changing customer files. Triggers provide continual updates on both potentially damaging and positive commercial activity. Bankruptcy, Tax Lien, Judgment, Collections and Late Payment triggers are typical business event change triggers that could indicate your customer is headed down the path of no return. Taking proactive action on these types of “business event” triggers will significantly reduce your losses which impact your bottom line.

 Just like social media sites provide you real time personal event information, triggers provide you with real time business event information. So the next time one you see a negative “business event” occurring with one of your customers, ask yourself “Was I the first or the last one to know?”

All too often as credit risk professionals, we don’t take the time to evaluate our credit policies because “that’s how it has always been done around here”. Unfortunately, it is this sheer mentality that increases days sales outstanding, raises uncollectable debt and prohibits us from identifying  good growth opportunities.  Reviewing your policies early and often enables credit risk professionals to  create more sophisticated rules around how to extend credit.

One way to establish a clear cut set of rules around your credit policy is to automate your credit decision making process. I know when some credit professionals hear the word “automation”, they run the other way. Typically, two concerns come to mind: 1) A computer is going to take my job away OR 2.) Credit automation is too expensive!  Well – Guess what?  Neither of these is necessarily true.

Automating your credit policy simply allows credit risk professionals to focus on the important things that matter when making credit decisions. Ultimately – a good credit decisioning system allows good applicants to get automatically approved and the bad applicants to get automatically declined without getting you involved.  Your time is most efficiently spent on the accounts that need human intervention – applications that fall on the cusp of a decision. This analysis even a computer can’t do! 

Most credit automation tools have come a long way. The market now offers various ‘out of the box’ solutions depending on the level of automation desired by your company. Once a costly tool – now it’s a cost savings tool!

How do you know if your business is ready to automate your credit decision making process? Take this self-diagnosis test. If you answer “YES” to any of these questions – it’s time to pull the trigger on automated credit decisioning!

• Is your credit operation decentralized with multiple regional analysts making decisions independent of one another?
•  Are you having issues establishing an audit trail on credit line extensions?
• Are you finding inconsistencies on how analysts assign out credit limits?
• Do you think your credit analysts are spending too much time manually reviewing credit applications?

 If you answered ‘YES’ to any one of these questions – automating your credit policy just might be the solution you’ve been looking for. So what are you waiting for? Pull the trigger!