In Part I of my Taking the Pain Out of Collection Claim Processing series, I described the importance of maximizing recoveries. In Part II I describe how you can use collection agencies as a strategic resource to help you maximize recoveries. In Part III I discussed the challenges that occur in the traditional claims process. In Part IV, I will describe the benefits of automating the collection claim process.
Recent developments have allowed for an automated collection claim process that facilitates the translation of claim data derived from the creditors AR system into the agency’s collection software and then standardizes feedback from the agency to the creditor. On the front end, automated claim placement is abetted with an electronic acknowledgement of receipt. As the claim is worked by the agency, AR account updates are automatically transmitted by the creditor to the agency while claim status information is transmitted back to the creditor in a standardized format that allows the creditor to not only monitor individual claim progress, but also apprehend a single consolidated view of their entire 3rd party collection efforts. Thus constituted, an automated collection claim placement process contains these three primary features:
- Automated Claim Placement
- Automated Agency/Creditor Data Flows
- Ability to Closely Monitor Status and Performance
The benefits associated with automating collection claim placement are related to timeliness, visibility and performance. To a large extent, performance improvements are an outgrowth of seamless processing and transparency and result in lower recovery costs.
In terms of timeliness, claims are placed in accordance with the creditor’s corporate collection policy parameters, not when the collector gives up or the manager decides tougher action is required. With an automated system, whether the account has been worked in-house or by an outsourcing partner, the credit manager can still put a hold on new placements, but otherwise a claim will be filed automatically. As a result, there are fewer unnecessary delays in claim placement, which enables the agency to start working claims sooner. That leads directly to higher recovery rates. Moreover, higher agency recovery rates mean fewer claims are ultimately forwarded to attorneys, which increases both the net recovery rate to the creditor and the agency’s commissions.
The greater visibility associated with an automated collection claim process also yields significant dividends. Because the agency receives full details on new claims, there are fewer subsequent requests for information from the creditor, and there is no need to rehash details – the agency starts work where the creditor left off. By the same token, enhanced status updates are provided to the creditor, and maybe most importantly, everybody is on the same page when a decision about how to proceed is required. The efficiency gains combined with improved transparency help to form a stronger relationship.
From a performance perspective, all parties benefit from the greater efficiency of an automated system. Data entry errors are for the most part eliminated as are incomplete claim files. As a result, agency management expenses are reduced even as recoveries increase. The shortened collection cycle also provides a cost-effective increase in cash flow for the creditor.
In the final analysis, both the creditor and the agency win. The dynamics related to increased process efficiency accrue to everyone involved in the process. In addition, the increase in process transparency creates an opportunity to renegotiate agency rates when it can be proven that the claims being submitted are cleaner, more comprehensive, and more timely, thereby reducing the agency’s costs of collection. After all has been said, increasing performance while lowering costs is the bottom line when it comes to optimizing AR performance.
Are you thinking about or have already automated the collection claim process? I’d like to hear from you…