Just weeks after the International Monetary Fund (IMF) lowered its annual growth forecast for 2023, further indications of slowing global economic activity have been announced.
Major factors in the expectation of reduced output next year include: market instability brought on by the ongoing war in Ukraine; global inflation hitting record highs across multiple regions; increased energy costs; and post-covid wage dynamics affecting trade viability.
As a result of the rising cost of everyday goods and services, personal lending and loan rates have increased in numerous major economies in recent months.
In the US, personal loans from banks surged from 8.73% in May to 10.16% in August.
When combined with widespread economic austerity and an increase in staff layoffs, a swell in lending results in higher rates of delinquency and defaults. This presents a significant challenge for collections departments relying on legacy systems to manage their communications and gather data.
The following statistics underscore some key figures for lenders, highlighting the growing impact of higher costs:
- The market size of the debt collections agencies (DCAs) industry in the UK has grown by 3% on average every year since 2017.
- The global debt collection software industry is set to increase at a compound annual growth rate (CAGR) of 9.6% in the next two years, from $2.9 billion in 2019 to $4.6 billion in 2024.
- The digital transformation market is on pace to grow from $469.8 billion in 2020 to $1,009.8 billion by 2025.
While these statistics highlight the growing collections market internationally, financial downturns can impact the success of recovery strategies.
Find out how your collections department can better navigate widespread economic challenges with these essential ideas for businesses:
1. Set clear, achievable goals
Give your collections team a clear understanding of company expectations and the means by which performance will be measured. Ensuring your entire team has an acute awareness of their goals will increase focus and create a benchmark for recovery success.
While the total amount recovered in a given period is the clearest indicator of performance success, there are a number of collections KPIs that can be used to help staff to better understand the impact of their work. Email opens, click-through rates (CTRs) and landing page views are all significant metrics to consider.
To learn more, read our blog: 7 Essential KPIs in Collections Software.
2. Offer timely feedback and acknowledge successes
It’s essential that progress reviews are held regularly, both to act as a timely reminder of expectations and as a means to praise staff for their successes.
By scheduling frequent feedback sessions, team members are empowered to work with uniform goals. Further, individual staff performance weaknesses can be addressed and supported over time–and team wins can be consistently acknowledged.
To make the process more efficient, roundup emails offer staff the opportunity to review their progress with greater convenience, reducing operational downtime and providing greater convenience during busy periods.
3. Foster a supportive work environment
In many instances, junior collections staff are new to the financial industry. To get up to speed, new team members need to be trained on key processes and best practices for debt recovery. And while adequate training plays a vital part in providing a solid foundation for success in the role, creating a culture of support amongst all staff will reduce anxieties and prevent a breakdown in communication between junior staff and management.
33% of employees point to a lack of up-front communication as having the most negative impact on their morale. To avoid this issue, consider introducing an open-door policy for grievances and complaints for your team members. The emphasis on shared discussion will allow potential issues to be identified and managed ahead of time.
By acknowledging the difficulties of the role and the pressures of the current economic climate, your team will also feel their issues and the roadblocks to success are understood. This can serve to foster a more transparent team environment, leading to creative ideas for improving performance.
4. Outline progression routes
Whether your staff are established team members or new recruits, it’s essential that every individual feels they’re adding value. This can be achieved by affording engaged and high-performing staff the opportunity to be involved in departmental decisions and influence wider strategic aims. A clear roadmap for career progression also offers a long-term goal for employees and gives cause for motivation over extended periods.
5. Reward financial wins
Debt recovery is a results-driven process, and financial rewards for delivering on goals are perhaps the most effective motivators.
It’s common for sales departments to use leadership boards and host contests at regular intervals to determine who’s leading the pack. The same model can be applied to credit teams, with rewards for commission earned or total revenues recovered. Delivering these bonuses on a quarterly basis keeps teams focused and increases the rewards on both a team and individual level. Likewise, profit shares are a long-term option to keep your staff motivated and invested in the wider success of the business.
6. Operate with transparency
Businesses engendering a culture of new ideas and transparency rank highly in premium applicants’ wishlists, with 87% of job seekers expressing a desire for transparency in their next role. To maximise this, offer the opportunity for staff to measure their performance against their peers. Doing so can foster a sense of healthy competition, though it is essential to gain feedback from your team and not alienate underperforming staff in the process.
7. Prioritise workplace flexibility and comfort
Since the covid-19 pandemic rendered vast swathes of the working world housebound in 2020, many employees have cited a preference for hybrid or fully remote work.
Offering workplace flexibility helps to break up the monotony of repetitive processes and conveys a trust in staff to perform consistently, irrespective of their location. But for operations that are 100% onsite, simple touches like regular decluttering, the introduction of wellness activities and the inclusion of design touches in the office will produce a more inviting work environment for employees.
8. Create a connection between your workforce and your brand
To connect your employees to your brand, you must first define the brand’s ethos and mission, before ensuring it’s continuously communicated across the organisaiton. Over time, and through engagement with your workforce, these core ideas may change, but it’s essential to ensure a uniform idea of the brand’s purpose exists throughout the business.
By clearly defining your company identity, your team will be able to articulate your core values and embody those ideas through their service. Equally, you’ll be empowered to set rewards that speak to your brand’s messaging.
9. Empower your staff through a digital-first debt management solution
As your business grows, harnessing and leveraging customer data and clearly defining lendee personas becomes increasingly complex. The result is a high cost basis in collections departments from a need to hire staff to perform manual processes at scale.
Automation via a cloud-native solution addresses this issue by expediting labour-intensive activity and removing reliance on IT departments, both in setup and maintenance costs.
To optimise communications strategies and produce valuable, actionable insights, businesses are switching to technologies that are modular, scalable and compatible with their choice of digital services. This makes for better resource allocation, futureproofing their digital infrastructure and empowering their collections teams to focus on proactively improving debt recovery rates.
Learn how to futureproof your collections approach by reading our blog Guide to Streamline your Collections Processes with Technology
