Top 5 strategic advantages of outsourcing your collections activity
If you think about it, most business decisions come down to striking the right balance between risk and reward. This is especially true for collections. The time and effort it takes to collect on delinquent accounts requires substantial investment of resources in technology and personnel—and you still run the risk of not being able to collect.
If you’re weighing the risk and reward of outsourcing your credit union’s collection activity, I’d like to discuss the five major benefits that come with outsourcing. If your goal is saving your credit union money while increasing the efficiency of your collections program, you’ll want to keep reading!
- Saving on the Cost to Collect a Dollar
Outsourcing your collections efforts can save you on the cost to collect a dollar. The expense of hiring and training a full-time collections team or using employees from another department to work in a collections capacity is substantial. When you outsource your credit union’s collections to a third-party vendor, your institution saves the HR-related expenses of hiring and training additional employees, as well as other costs associated with the debt collection process.
Instead of investing in collections technology and increasing your staff, outsourcing your credit union’s collections workload allows you to take advantage of the scalability of a third-party provider who has already made the significant investments you’ll need to reduce delinquencies and increase collection rates.
One of the most attractive aspects of outsourcing is that it’s a variable expense. As your delinquency rates decline, so do your costs. Compare this to employing a full-time collections staff—you don’t realize a reduced cost when delinquency declines; you just have an employee you now have to keep busy.
- Reducing Delinquency Rates
Delinquencies can cause cash flow and many other disruptions for a credit union. When you outsource your collections activity, you can significantly reduce your delinquency rates. Partnering with a third-party collections provider with employees who specialize in collecting can lead to lower delinquency rates because you are essentially acquiring a full-time staff solely dedicated to recovering past-due funds for your institution, both during and outside of your credit union’s normal operating hours.
Collections is a compliance-heavy process, and a reputable collections partner should employ people who are deeply familiar with regulations and best practices for collecting funds and have the expertise and patience to handle sensitive situations in a professional, courteous manner. They will also know the optimal communication tactics for getting delinquent accounts up-to-date before they progress into the latter stages of delinquency.
- Reducing Collection Time
If your credit union wants to reduce the time spent on collections, outsourcing gives you an external team of professionals that can dedicate all of their time to these efforts and get accounts current as quickly as possible. This greater focus and time creates a shorter collections cycle, reducing the amount of time spent collecting on delinquent accounts.
- Communicating More Effectively with Past-Due Borrowers
One of the biggest challenges in collections is connecting with past-due borrowers to get them up-to-date on their payments. Outsourcing your collections activity allows you to communicate with your members who are in arrears more consistently and effectively.
Today’s consumers expect to be able to connect with their financial institution on their terms. This means developing a communication strategy that includes a variety of platforms, including text, email, and interactive voice response (IVR).
Offering an omnichannel experience is not only a value-add for credit union members, it will also help your credit union improve collections performance, make more meaningful connections, and empower your members to make well-informed decisions that ultimately drive growth and improve service.
- Increasing Productivity and Revenue
Being more productive while increasing revenue is the goal of every successful business. When your credit union outsources its collections activity, it allows your employees to perform the duties that improve service and promote member satisfaction. While your third party handles the more tedious and time consuming collections tasks, your employees can focus on finding solutions for the most serious or delicate cases, enabling your institution to foster better relationships with your members.
Not to mention, you can dedicate more time, resources, and effort to achieving strategic goals, like providing a better member service experience, improving your brand and marketing, servicing and closing loans, and generating new revenue opportunities.
While it can be intimidating to outsource such an important part of your business, outsourcing all or part of your collections activity can help save your credit union time and money.
To learn how SWBC can help you decrease delinquency while improving your members’ experience, click here.
