Uncovering the Hidden Costs of ARM

3 Introduction

4 Optimizing the Workforce

6 Improving Processes

8 Optimizing Technology Tools

9 Addressing Hidden Costs

10 Conclusion

11 About Waypoint

Table of Contents

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Unpaid debt has a clear negative effect on a company’s

bottom line,1 and this justifies investing in a solid accounts

receivable management (ARM) operation. Whether that

happens in-house or through third-party outsourcing,

the process of chasing delinquent accounts can be costly

and time-consuming. The costs multiply the longer debt

goes unpaid.2

There’s no way around obvious costs like staffing,

benefits, overhead, and infrastructure. The problem is,

depending on how these elements are structured,

additional and unnecessary costs may lie hidden in the

form of inefficiencies and wasteful practices. Indeed,

closer scrutiny of workforce deployment, processes,

and technology tools can reveal latent costs that,

if left unexamined, compound the effort, energy,

and investment it takes to recover funds from among

the more than 77 million Americans with unpaid debt.3

As we’ll see, these problems are not uncommon

in the ARM industry, and consequences run the gamut

from administrative delays and unpredictable cash flow

to inefficient staffing and bad morale. The good news is

that, with a little investigation, organizations can reveal

and remedy these underlying costs. While every business

must formulate its own approach, it’s possible to seize on

some common dynamics to guide improvement efforts.

This eBook looks beyond the obvious costs associated

with collections to focus on underlying inefficiencies

and financial liabilities that may go unnoticed. We place

special emphasis on three overarching factors — people,

processes, and technology tools — that cut across the

whole organization and merit special scrutiny in our

attempt to correct problems and shore up the bottom line.

Introduction

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It’s no secret that staffing — including salaries, benefits,

training, and recruitment — represents a sizable chunk

of any organization’s financial burden. In the ARM

industry the pressure may be greater, considering

the intense training and skills reinforcement required

to keep pace with constantly-evolving regulations

and ever-growing channels for customer engagement.

Especially for businesses managing their own accounts

receivable teams, where collections might not be a

core competency, this can lead to more problems

around recruiting, training, and retention.

Against this backdrop, turnover is a constant struggle.

Regardless of whether one uses an in-house team

or outsources, continuity is important to managing

costs. Unfortunately, contact centers are traditionally

high-turnover workplaces — and that can mean

lost productivity as new staff take time to ramp up.

However, when we dig deeper into precisely how

workforce assets are structured and staffed, we

find deeper problems that can, at once, be systemic

and unnecessary.

A Rigorous Approach to Rightsizing Rightsizing typically implies getting the right number of

people making calls at the right time. But when we look

more closely into rightsizing specific skills throughout the

organization — not just for agents, but for administrative,

legal, and other support staff as well — a more complete

picture of organizational costs and how to control them

comes into view.

The rigorous approach to rightsizing involves questioning

where and how an organization is under-utilizing or

over-utilizing any number of professional roles within the

ARM operation. One might probe, for instance, whether

there are too many attorneys on staff or not enough.

A further drill-down might reveal whether some legal

tasks could be assigned to paralegals or legal clerks.

This process, in turn, can lead to additional questions

that may be highly nuanced, but nonetheless

mission-critical, to the organization.

“It’s easy to ask why we’re using a lawyer with 20 years of

experience when, on the surface, it seems like something

a paralegal with five years of experience could handle,”

explains one industry veteran. “But what if we take that

too far? Given the regulatory environment we’re

operating in, are there times when we’re safer keeping

that task with an experienced attorney to minimize risk

of a compliance violation?”

Optimizing The Workforce

“ …rightsizing involves questioning where and how an organization is under-utilizing or over-utilizing any number of professional roles…”

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Management Issues Where and how managers are positioned and trained

in the organization is especially critical. It’s a challenge

to find, onboard, and train managers who have enough

career experience to do the job — but who nonetheless

update their skills continually to keep pace with

ever-changing regulations and industry best practices.

As with attorneys, managers must be fully current

with the latest regulations and compliance pitfalls.

And their soft skills in managing both agents and

customers have to incorporate the latest industry

trends around collaborative problem-solving, active

listening, and optimizing call flow. In addition, managers

have the added burden of overseeing an expanded,

omnichannel universe for customer engagement that

goes well beyond that initial phone call.

Indeed, the old-style team leader in a traditional

call center would quickly drown in a modern ARM

operation of diverse touch points and channels

involving phone, letter, text, email, and web portals.

With each new channel comes more opportunity

for successful resolution, and more potential risk for

compliance violations and customer service faux

pas. Managers must be channel-literate and also

grasp the sophisticated data and analytics needed

to navigate omnichannel success. And of course

they must be able to coach and nurture subordinates

on all of these skill sets.COMPLIANCE REGULATIONS

AGENT CUSTOMER

MANAGERS

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How processes and procedures are managed is closely

linked to, and just as important as, how the workforce

is structured. For every obvious question, such as

“What’s the best time to make calls?” — there are

deeper questions to explore, such as “Which reports

are useful, and which are unnecessary?” and “Was

that pleasant-sounding 12-minute talk-off really

a success if it requires four subsequent follow-ups

resulting only in partial repayment?”

For many receivables operations, a closer look at

processes — and whether they’re driven more

by logic or tradition — may uncover multiple

inefficiencies. Stamping out operational inefficiency

is especially important for any organization looking

to grow or expand because process headaches

are guaranteed to scale up along with the

business operation.

“Total Cost of Resolution”Business students don’t get far in their studies before

encountering total cost of ownership4 (TCO), a

bedrock financial principle that considers indirect

costs (such as operating a car) along with direct costs

(such as buying the car to begin with). Consider

extending this logic to the collections process for

what might be called the “total cost of resolution.”

The previous scenario about the 12-minute talk-off

that required multiple follow-ups is a perfect case in point.

A cursory look at talk times and resolution rates may

benefit from a deeper analysis — aided by advanced

analytics — of exactly how many follow-ups happened,

which channels were used, and what percentage of

that effort was spent by agents vs. call center managers

vs. attorneys. “It’s not that operations executives aren’t

aware of these additional costs,” said an industry

veteran. “The challenge is that the primary focus is

on client-reported results, especially in champion-

challenger competitions. If additional calls or contacts

are required to fulfill the reported numbers, they can

often get overlooked in the general program workflow.”

Added scrutiny and measurement can reveal the real

costs of all interactions — the total cost of resolution —

and the process improvements that might bring

down these costs.

Improving Processes

“ Stamping out operational inefficiency is especially important for any organization looking to grow or expand because process headaches are guaranteed to scale up along with the business operation.”

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As complex as these analyses might seem, the root

cause of inefficiency frequently comes down to a

simple and very human dynamic: the tendency of

people to want to do things the way they’ve always

done them. This adherence to tradition can make

workers blind to process improvements now

possible through new technologies and smart

strategic planning.

For instance, maybe the equivalent of three full-time

employees are busy with manual invoicing, even

though such work can be easily automated.5 Or perhaps

developers are wasting time maintaining old-style

productivity reports that never get used because the

organization’s new analytics architecture is producing

better and faster insights.

Another enduring pitfall is excessive points of

intermediation in the review or decision chain.

“I’ve seen situations where a COO may ask for a

report on, say, portfolio liquidity rates vs. customer

satisfaction,” explained one veteran ARM executive.

“But once generated, that report has to be vetted

through a supervisor, director, and maybe a VP before

it lands on the COO’s desk a week later. That’s a waste

of both time and money.” Establishing alignment

and confidence in report data, streamlining reviews,

and implementing real-time report publishing

options can help.

Ultimately, leaning too heavily on cumbersome

or outmoded legacy processes can be costly to

businesses. And there’s often little more justification

for obsolete processes than the fact that “it’s always

been done that way.”

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Optimizing Technology Tools

Choosing and implementing the right IT tools is a

challenge in even the best of circumstances. There are

many competing technology options on the market, and

many internal choices to make about budget, capabilities,

security, and how to balance on-premises capacity with

cloud solutions. Other tasks involve standardizing data and

linking disparate systems and databases, perhaps involving

multiple file formats and multiple languages.

Legacy System DrawbacksUnderlying all these priorities, however, is a fundamental

consideration that’s often overlooked. No matter how

strong the need to upgrade performance, many ARM

operations struggle to say goodbye to their legacy IT

systems — even though such systems are known

obstacles to the very capabilities being sought.6

“People tend to stick with legacy systems because that’s

what they’re used to,” observed a longtime collections

executive. “But what are these systems really costing you?

When you look at the licensing, maintenance, and

performance limitations, you start to see that investing

in legacy technology is like investing in a Band-Aid®

instead of investing in agility.”

Today’s requirements for omnichannel capabilities further

heighten the focus on capacity and performance. IT

systems must be powerful enough to support real-time

and self-service functionality, while providing the right

analytics architectures and processes to capture data

for reporting, insight, and decision support.

Legacy systems struggle to support the volume,

velocity, and complexity of modern data, and such

systems are frequently difficult to scale. Furthermore,

the fact that legacy architectures have been built over

the course of what may be decades is a dual challenge:

People feel invested in the legacy environment, even

as that environment has grown more complex and

unwieldy through years of incremental enhancements.

“ There are many competing technology options on the market, and many internal choices to make about budget, capabilities, security, and how to balance on-premises capacity with cloud solutions.”

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1 Workforce Improvements

Focus on rightsizing that goes beyond typical

assessments of labor costs or even common

productivity measures like discounted cash flow

analysis7 to calculate the precise cost of unpaid debt.

Your rightsizing mission should encompass all

organizational roles and how best to staff and structure

those roles. Furthermore, ask the right questions of

your management team: Do supervisors have the

appropriate level of experience? Are they breaking

down silos and putting enough centralization in the

right areas? Do they cling to legacy skill sets that

aren’t current? Can they work with behavioral data

and analytics reports? Comprehensive questions and

honest answers will pave the way to cost reductions

and better productivity in the workforce.

2 Process Improvements

Audit processes to remove unnecessary work

or bloated hierarchies for reviewing reports or

making decisions. Abandon tradition in favor

of logic in evaluating and setting procedures.

And make sure the changes you implement can

scale with the business. Most importantly, learn

to tell the difference between one-time anomalies

and systemic problems. Spending too much

time retooling processes for something that

probably won’t happen again can be just as

wasteful as failing to fix process breakdowns

that keep recurring.

3 Technology Improvements

Thoroughly question your legacy systems and calculate

the true costs— including upkeep, security, licensing,

and latency of information availability. Based on that

assessment, consider options—including replacing

an entire system, optimizing current technology, or

switching to an external provider. Embrace agility by

framing needs around the business problems at hand,

instead of specific requests for specific technologies.

And make sure that whatever systems you use are up

to the job of supporting modern demands for seamless,

omnichannel engagement with customers and can

provide the analytic heft on the back end to process

behavioral data for insight and competitive advantage.

Addressing Hidden Costs

Once the hidden costs are laid bare, what’s the best way to go about mitigating them and building a stronger and more efficient collections operation?

Here are a few priorities to keep in mind for each of the three focus areas:

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Probing into hidden or unexamined costs can lead to deeper insights and more opportunity to improve ARM

operations and the bottom line. Regardless of whether the focus is on people, processes, or technology, many

solutions involve questioning assumptions about how things have been done before. This culture of questioning

the status quo and asking how things might be done better should permeate the entire organization, from the

CEO all the way to the front-line agents and support staff. When that happens, all the costs of doing business

come into view — and the organization’s bottom line benefits as a result.

Conclusion

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End Notes1. http://www.inc.com/guides/2010/06/how-to-improve-cash-flow.html2. https://hbr.org/2009/05/need-cash-look-inside-your-company3. http://www.urban.org/research/publication/delinquent-debt-america4. http://www.investopedia.com/terms/t/totalcostofownership.asp5. https://www.paystreamadvisors.com/resource/2016-invoice-workflow-automation-report/6. http://deloitte.wsj.com/cio/2013/10/01/when-companies-become-prisoners-of-legacy-systems/7. http://www.investopedia.com/terms/d/dcf.asp

Waypoint Resource Group is a 100% US-based company

and a member of the Trellis family of companies.

Waypoint provides multi-channel accounts receivable

management solutions to businesses in a variety of

industries including automotive, utilities, healthcare

and telecom/cable/satellite. Trellis Company (formerly TG)

has nearly four decades of successful experience in

accounts receivable management as a federal loan

guarantor. Waypoint draws from this experience and

heritage to deliver results that improve revenue flow

and recovery as well as safeguard consumer relationships.

Contact Waypoint at (888) 648-6606 or www.waypoint.com for more information.

About Waypoint