How to Build an Effective Collection Strategy | Collection Strategy Guide | Enterslice

The collection process is defined as a strategic, well-coordinated and timely activity aimed at collecting loans from clients. The main aim is to convert the fixed accounts of delinquent holders into liquid assets as soon as possible while maintaining the client’s relationship. Generally, the collection requires timely interaction with the client and an understanding of the client's situation over the loan duration. The client should be provided with an option to pay in different methods that are timely and more appropriate to the given situation. The general practice of recording and following up with the client helps monitor the client's situation.
Now we will discuss what are the challenges in #collection #strategies
The first challenge is the High Number of Collections: Due to the high number of collections, the collection strategies of the business become futile. As people continue to lose their job, the burden of collection increases on the company, leading to the accumulation of the large number of debt in the company's financial statements.

The second Challenge they face is the Unreliable contact Information of Debtors: The collection becomes impossible when the client is untraceable. Even if the collector is trying to pay the debt, it becomes hard without the latest contact information to have friendly contact with the client.

The third challenge is Same Collection Strategies: Applying the same collection process in different clients' situations has made the company face losses. These losses forced the company to opt for different strategies for clients. Generally, different client requirements are needed to be fulfilled, which has necessitated the companies to apply different strategies in negotiating with clients and help recover full payment.
The fourth challenge is the Time required to Identifying Delinquent Accounts: The fundamental challenge that the collectors face is sorting the delinquent accounts.

Now we will discuss what are the General Principles involved in the Collection of Strategies
• The first principle is that the strategy should be efficient so that there will be a full recovery.
• The second principle is that the strategy should be as such to maintain the client relationship.
• The third principle is that the strategy should provide diverse payment options to clients.
• The fourth principle is that the strategy shall involve identifying and evaluating the client's situation.
• The fifth principle is that the strategy should be as such to adapt to the given situation.
• The sixth principle is that the strategy should aim at receiving the maximum amount possible.
Now we will discuss What are the Best Practices in Collection Strategies?
The first practice is that the company should Keep ahead of bad debts: The use of applied analytics simplifies the process of debt collection. It aids in the avoidance of bad debts and intricate collections. Applied analytics will be used to analyze the client payment pattern and alert if there is a delay.
The second Practice is to provide diverse payment methods: Many businesses continue to accept traditional payment methods. Simplifying the payment method through electronic means will help prevent errors and build confidence among the clients in the payment process. Another method of simplifying the payment technique is introducing the concept of an automated invoice generator.
The fourth practice is the Centralised Collection System: A unified collection system will reduce the overall cost of the company's collection process. A unified system will accumulate all the data in one place and help track the delinquent accounts' records.
The fifth practice is Maintaining client relationships: Personal communication with the client will help in understanding the problem behind the non-payment of dues and helps in maintaining a good relationship. Many businesses compete to provide diverse credit options to their customers in a competitive world.
The Sixth practice is the Complaint processing system: There should be a complaint processing system that will manage all inquiries, complaints, and disputes in one place. If the disputes are not resolved effectively, they will cause significant problems that harm the consumer relationship and the company’s reputation.

The seventh Practice is Hiring Debt Collection Service: The company shall opt for a debt collection service agent if they have many account receivables. Hiring a debt collection service would reduce the company's efforts and help them achieve their daily business objectives.

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