Principles of Bank Collections
Effective collections and recovery guidelines alongside advanced software, helps banks and credit unions remain in compliance and control the risk. Clear strategies also ensure trustworthy and efficient administration that helps realize those objectives.
There are certain solid principles found particularly valuable in seeking payments including gathering the funds, maintaining a systematic follow-up, engaging the customer, and preserving goodwill.
The primary responsibility of the collections departments is to gather the money as close to the terms of the obligation as possible. The debtor has an obligation to pay within the terms of the agreement. The tone may be tolerant at first, but should be intensified and accelerated as much as necessary to ensure payment by a debtor.
Accurate analysis and a well-defined policy help financial institutions handle problems within the company’s objectives. It also could allow flexibility to consider the economic climate in general, importance of the customer, and effect of the combination of dollars and number of customers delinquent on the entire receivables portfolio.
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Systematic Follow-Up and Discussion
After the initial engagement with a delinquent customer, it is important to keep additional contacts on a firm schedule. Make notations in the file about expected payments.
Methodical follow-up of accounts, even those which cannot pay right away, reinforces the serious status brought on by outstanding debt and emphasizes the importance attached to it by the creditor. That in itself is an important advantage.
Consider the pattern of payment, whether there have been partial payments or any effort to settle the debt. Has the customer made any sincere effort attempt to take care of the obligation? If the customer is new, you owe it to them and your company to make your policy clear from the start. Neglecting delinquency at this time is inviting problems forever with the account. If it is an old customer, how has the payment pattern been? What about previous delinquencies? Is there a problem with the product or service?
The object of the discussion remains obtaining the debtor's explanation for the delinquency. Is it due to a dispute; temporary shortage of funds; or the customer intention to hold off payment so the creditor's money goes elsewhere?
The same investigative and analytical tactics used for credit approval are applicable for the process.
A customer experiencing difficulty in meeting payments can still become a good customer in the future. Consequently, it is important to show empathy and preserve goodwill while pursuing repayment of debt. This requires discretion, plus familiarity of the customer and industry.
Previous dealings with the customer can help. How has the customer lived up to its commitments in the past? Has the account ever been closed and reopened?
Good business requires the prompt settlement of invoices without any damage resulting to the customer relationship.
One of the advantages of specialized bank collection software is maintaining vital information that can help credit and customer service personnel to better understand the relationship of the customer and overall marketing objectives of the financial institution.
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