For years now, debt collections has seen banks and collections agencies adopt one-size-fits-all approaches, primarily getting in touch with past-due customers via phone calls or letters through the door.
However, EY estimates that these traditional collections methods garner a success rate of just 5%. The message is clear: collections approaches need to be improved. But how do you know where to start? The answer: Process mapping.
This post will explore why process mapping needs to be your collections department’s secret weapon. It’ll help you identify and name specific problems you’re running into, identify areas for improvements, and unify your team as they collaborate together in building a better approach. For example, Crédit Agricole created 64 detailed process maps in order to reinvent their customer payment processes—reducing the 960 hours per month wasted to duplicate work and the 480 hours wasted per month due to inefficient operating processes. They unlocked 10% productivity gains, leading to both fewer delays and fewer complaints.
Let’s analyse how you can begin your process mapping journey.
The what, why, and how of process mapping
To analyse your existing process(es), you first have to map out each step in granular detail.
Process mapping is a useful exercise no matter which industry or department you work in. If you work in HR, you might map out your current employee onboarding process. Or, if you’re a marketer, then you’ll likely focus on producing customer journey maps. Process mapping forces you to clearly break down one single process (or a string of processes) into its constituent parts, helping you analyse whether it’s as efficient as you initially thought. You might believe that you have a logical, well-structured collections process, but when you do some digging, you realise there are multiple hurdles hidden within this seemingly simple process.
What’s more, you can now name the problem in front of you. Instead of saying “Our problem is that we’re too inefficient.”, you can say “Our problem is that we struggle to get from raw customer data to tangible, useful insights.”
Process mapping gives you both a big picture and detailed view of the process in question. It allows you to clearly link specific, daily actions to their overall purpose, highlighting inefficiencies and helping reduce wasted spend/time/effort.
Why collections needs to change
Currently, too many banks and financial institutions rely on inefficient collections processes. Agents handle everything manually, from identifying whom they need to call and when, to chasing up their past-due customers’ contact details, to updating the information they hold on each customer after each time they speak to them. They are also missing out on several behavioural insights that only a digital collections process can offer.
An over-reliance on manual, undocumented processes means that collections teams adopt an ad hoc approach to outbound communications. This sometimes results in inefficient work, with the agents’ pace of work dictating the movement of a claim from one end to another. What’s more, many collections departments/agencies lack a unified strategy dictating how they approach past-due customers at different stages of their repayment journey. Some agents might turn the screw on customers that are 7 days past due, while other agents may reserve this level of pressure until customers are a month past due.
Without a well-defined and documented process in place, ad hoc methods to handle past-due customers risk destroying customer relationships.
Digital tools should augment collections processes where possible. They should provide a centralised hub where everybody on the team can view the overarching collections process, where each past-due customer is in their journey to repayment, a list of all outstanding repayments, every past-due customers’ contact details, and notes from all previous interactions, to name a few.
It’s clear that existing collections departments/operations need a renaissance of their own. Collections departments must first analyse where their existing processes are falling short: breaking them down into their constituent parts, identifying what needs to be improved, and how.
The benefits of process mapping
Process mapping gives you a bird’s-eye view over your processes, allowing you to objectively assess their effectiveness. Imagine you’re analysing your existing collections workflow. Each Monday, the manager shares a spreadsheet outlining everybody you need to get in touch with (including both existing and new customers). Agents then work their way through the shared spreadsheet, assigning themselves to new customers that they’ll be in charge of contacting.
However, there’s no set strategy dictating which agents are in charge of speaking to which past-due customers. Your most experienced agents need to deal with past-due customers that owe the most and/or have struggled to pay up in the past. Yet, this is easier said than done. You might not even know if this is a problem in your department until you go looking for it.
By mapping out your processes, you are asking yourself questions such as, “Why are all agents not able to reach customers at certain hours?” or “Why are days past due (DPD) 7 – 30 recovering at a higher rate than DPD 31 – 60?” Such questions will reveal the need to go for different operating models. For example, instead of working on a shared spreadsheet, you soon realise that you need a centralised and automated collections management system. This realisation may emerge if you asked yourself, “how much time does it take to assign work amongst your agents manually?”
Once you know what could be improved and how, you can then set about finding the right solution or employee for the job.
Process mapping in banking
Process mapping has been shown to drastically improve banking outcomes across a wide variety of areas.
For instance, Sparda Bank Berlin eG used process management techniques, with process mapping at the heart of these efforts, to analyse all existing processes throughout the bank. Having analysed these processes and brainstorming potential improvements, the bank then shared its new, improved, organisation-wide best practices with its 700-employee-strong team—giving everyone a precise blueprint for how to operate moving forward.
The outcome of this exercise need not be a finding that is game-changing on the face of it, it can be as simple as knowing how to make all employees 5% more efficient with their time, the gains multiply when you have 20 employees in the team.
Map your way to a more successful future
As Edwards Deming, the prominent engineer, physicist, and management consultant whose work helped propel Japan’s 20th-century economic boom, said, “If you can’t describe what you are doing as a process, you don’t know what you’re doing.”
By mapping out your current collections workflow, you’ll be able to better see the interplay between different steps each individual debt/claim takes as it moves to be repaid by your customers. It will also give you a clear overview of your own collections value chain and how it can be improved.
Map out your collections process today and identify room for improvement. If you’ve already committed to making your collections process more efficient, cost-effective, and scalable, taking a digital-first approach is a good first step.
Jan is one of the first members of the receeve team, and has become an expert on the fintech industry, particularly digitising collections and accounts receivable processes. He is a talented multi-disciplinary professional with immense drive to bring modern technologies and processes into financial services.