Time to talk collections

Money mattersAt a time when budgets are being further constricted, and public sector workers are under increased pressure to demonstrate value, the need to focus on debt has never been more crucial. So what’s stopping local government and those in the wider public sector from exploring the value of outsourcing their collections to a third party?

To some, the thought of employing an external debt collection agency (DCA) to recover council money is an anathema. They need to be persuaded that the popular portrayal of debt collectors in the media isn’t true. Whilst many councils are still comfortable using bailiffs, and a similar number will think nothing of engaging a solicitor, the use of an external DCA is considered by some to be a step too far, with an inherent threat of losing control of the recovery process.

Successful deployment
Not everyone, of course, thinks the same way. A good number use private collection agencies very successfully: users include the Department of Work & Pensions (DWP), the Driver & Vehicle Licensing Agency (DVLA) and the National Health Service as well as many local councils, deploying agencies for all manner of collections from mainstream to sundry debts.

Whilst the commercial sector and the public sector are different in many ways, they are similar in the sense that cash is king; without it, they cannot deliver the services on time and on budget promised to their respective customers. Improving cash flow means having a sound credit management strategy; a sound credit management strategy includes an informed policy on collections, and the possibility of engaging with external debt collection agencies. So for those that have yet to be convinced, how do we overcome their concerns?

Be in control
Some believe that in outsourcing to an agency they will lose control of the debt and the debtor – and will not have control over what is done and said on their behalf. Cost is also a concern. Senior management employ credit controllers or departments to stop debts occurring in the first place. To employ an agency therefore, in their minds at least, is doubling up on costs – creating additional expense. It is in effect paying for the same service twice – and would mean admitting that their own collections team has failed.

It seems strange that some appear to be comfortable with the concept of writing off a debt and losing money as a result, but most uncomfortable with the prospect of paying to recover it!

Employing a third party to collect debts – and specifically a member of the Credit Services Association – does not mean losing control, or putting ones reputation at stake. Members of the CSA adhere to a strict Code of Practice (the same Code that was used as the basis for the OFT’s Guide), and for the most part appoint a board director responsible for compliance. There are specific procedures and rules that these members follow with teams dedicated to a specific task – and that is recovering debt.

A core service
For CSA members, their business, their training, and their motivation is all about achieving results for their customers. They are professionals who pride themselves on their ethics, adhering to the very latest TCF (treating customers fairly) policies, and indeed promote compliance as a competitive advantage. Collections is not a bolt-on service to other services that they may undertake. It is core.

They will deploy a series of skills in consultation with their client, rather than one size fits all. Their methodology is one of engaging the debtor, not confronting them, separating those that “cannot pay” from those that “will not pay”. It is this collaborative approach that reaps better results, and maintains the creditor/debtor relationship for the future.

CSA members are also only paid on results. Of course that means that they have to be efficient, but often the very fact that a debt had been referred to an external agency makes it more serious in the eyes of the debtor who has previously avoided or ignored several attempts by the local authority to collect what is rightfully theirs to collect.

Whilst certain legal firms may operate a no win no fee service in specific cases, in the debt collection industry, no win no fee is pretty much accepted as the industry standard. Clients, therefore, have quite literally nothing to lose and everything to gain.

The market for debt collection continues to grow because organisations – including many within the public sector – are increasingly recognising how agencies should be utilised as an integral part of a credit management strategy. And with credit teams increasingly measured on reducing the volumes of debt and increasing the amounts collected, then now is the time to look at the advantages that bringing in outside support can deliver.

About CSA
The Credit Services Association (CSA) is the only national association in the UK for companies active in relation to unpaid credit accounts, debt recovery agencies, tracing and allied professional services and has a history dating back to 1902.

The CSA’s knowledge of the industry remains second to none, and as the industry continues to grow and develop into a more complex specialist market the CSA is on hand to provide members with up-to-date information, on issues affecting the industry now and offering advice and guidance along the way.

Members offer a wide range of bespoke credit services, including credit investigation, status enquiries, company searches, credit control expertise, credit insurance support and debt purchase.

The CSA works for the benefit of those companies active in relation to unpaid credit accounts; debt recovery, tracing and allied professional services. As part of its function the CSA aims to promote best practice throughout the industry. The CSA has developed its Code of Practice which all members must adhere to. This code is now the benchmark for Best Practice in the industry, assuring quality and professionalism in the services members provide.

For more information:
Tel: 0191 2865656
E-mail: info@csa-uk.com
Web: www.csa-uk.com