In a recent blog post we touched on the fact that psychosocial factors can influence borrowers. That discussion brings to mind a well-known psychological theory that gives us a way to think about accounts receivable management (ARM) strategies.
Maslow’s hierarchy of needs posits a pyramid in which the fulfillment of an individual’s essential needs supports development of more advanced functions and aspirations. With basic physiological requirements at its foundation, the pyramid rises through needs including safety and esteem to a high point of “self-actualization.”
Managing accounts receivable involves a number of needs too, some basic and some more complex. A foundational framework for success for the ARM industry might resemble something like this:
- Compliance: Compliance safeguards are the table stakes for operating in the collections business. To stay solvent, businesses must pursue collections without stepping on the third rail of regulatory violations. Like the medical doctor’s credo to “first, do no harm,” the chief priority is to remain compliant and not run afoul of the law.
Compliance involves transparency — within an organization and across the broader outsourcing community — to ensure there are no surprises and nothing is happening outside the scope of a company’s established collection strategy.
- Efficacy: A business may be fully compliant, but are its operations generating cash flow? At the end of the day, no organization is going to stay in business if it’s not successful in getting the money.
Are operations protocols agile? Can records be accessed quickly to demonstrate compliance, especially for a regulatory audit? Can customer engagement codes for respect be honored in parallel with collections goals? These competencies are tools to get a business beyond survival mode.
- Culture: A personal demeanor centered around empathy and collaborative problem-solving translates into better resolution rates. Businesses that apply those values have the basis for a successful and dynamic company culture. This is where proven ARM best practices are reinforced and reflected at every opportunity, boosting agents’ levels of respect and customer care to improve collections outcomes and customer relations.
The best agencies are adjusting how they communicate with borrowers. They’re embedding concepts of empathy and teamwork in call center scripts, and making granular tweaks in choice of words or tone of voice to keep interactions collaborative and resolution-oriented.
The best ARM strategies reduce reputational risk by keeping client control over both the collection strategy and execution.
The best ARM strategies reduce reputational risk by keeping client control over both the collection strategy and execution. A foundational approach can help achieve this by positioning a cluster of basic and advanced ARM needs as key pillars of support in the overall collections efforts.
For more information, download our free ebook Safeguarding Both Cash Flow and Reputation in Debt Collection.
— Gary Dorman, Director of Operations (@wrg_gdorman)