The abundance and development of new systems is not limited to the ‘core’ activities of credit management, credit assessment and collections, and many organisations are taking advantage of the APP based development opportunities which are faster and easier to access and deploy. As mentioned in a previous article it is tough for the major systems ERP to easily keep up with the constantly moving target of customer and business demand, not least as large ERP systems are managed by in-house IT teams and governance for implementing ‘a change request’ can be complex and protracted. These long established players remain at the heart or the engine room of many businesses and will do for some time if not forever.
I know one organisation whose billing system is fundamentally the same one that was originally designed in 1973. The addition of smaller specialist systems are providing the innovation. For example I was at a conference recently and met with one of these move fast moving innovators who showed me a real time demo of an HR system on his smartphone. The task was a simple one which many HR teams struggle with, the maternity entitlement for staff. By gathering multiple data sets from the various, HR, Payroll, employee information systems this aggregator took less than 3 minutes to complete the task that used to take 5 days, recalculating salary, holiday start and end dates. This was ‘employee self-serve’ and required no HR involvement. This was just one of the applications they were working on as this was more of an aggregation tool than a specific specialist system designed to fix a specific process, it could technically be applied to any functional activity.
Taking the complexity and manual handoffs out of processes and systems is what process improvement is all about, yes making the process more efficient but also cutting the cost to serve. It has traditionally been easier to pass off the complex or difficult activity to 3rd parties like debt collectors and solicitors. When you have done all you can, handing this stuff off whilst you focus on the ‘current’ debt has been the accepted norm, the hope being that by focusing on the current stuff the amount being handed off will reduce, but this isn’t always the case as we know. The danger is that debt collectors and solicitors can become a safety net and business as usual, a little like credit insurance can be, don’t get me wrong there is a place for all of these activities not least as I worked in the debt collection industry for back in the late ‘80s, but surely if there were no safety net you would make sure that you were very careful, more focused and properly trained before you stepped onto the tightrope.
The difficulty has always been that managing debt at the end of the ‘normal process’ has been seen as, well difficult, and less valuable to the organisation. By the time a debt is that overdue, contact with the debtor is reduced, there are more disputes, customers are either not who you thought they were or even where they said they would be and frankly you have bigger fish to fry. Additionally any margin you may have had on the product or service you have sold this customer would have been lost. Adding debt collection charges, solicitors fees etc. can be seen as throwing good money after bad and that isn’t the ‘mystical margin’ but real money. When the debt progresses to ‘legal’ you are in the hands of a complex jargon based process with timeframes that are protracted, expensive if unsuccessful and in any event by the time it gets to this point and you have decided to use the ‘nuclear option’ you have probably given up on the customer anyway. One thing’s for sure the sales guy would have lost interest in assisting you.
So what options do you have, write-off or give it to someone who will take it off your hands and try and recover at least something? As a credit manager using a 3rd party means you are still seen to be doing something and you cannot give customers the impression that you are soft touch, as in these days of social media that fact that ‘…you can order stuff from XYZ Co Ltd and they don’t chase you…’ will be out there very quickly.
There has always been a view that getting the upfront processes right at the beginning will reduce the instance of passing debt out to someone else and you could argue that with the development of the more automated and behavioural credit assessment and collections systems (see last month’s article ‘Getting the Job Dunn’ October 2017) are the days of the ‘3rd party’ safety net are numbered?
As mentioned the issue of the 3rd party in the legal area is that this is complex, rules change, fees change and managing a ‘legal system’ is therefore expensive, however, the new name and letterhead is a clear demonstration to the customer that the situation has now escalated, this strategy alone produces results. But debtors are now more savvy, know the rules through Google and Social Media searches and as a result know what to do to delay paying. Determining a can’t pay from a won’t pay without proper systems and procedures is almost impossible and dealing with difficult customers is book in itself.
Technology in this area is moving forward at a very fast pace, but back in 1991 we implemented a litigation bureau service via a telecoms link, by the time we finished we had a litigation system managed by 2 credit controllers with over 4,000 cases. No upgrade downtime, no IT cost, pure ‘pay as you go’. This system is still out there but now a cloud based SaaS system, back in 1991 the potential benefits of ‘pay as you go’ systems were recognised, incidentally the budget for the purchase of a litigation system was £300,000 with an expectation of a 6 months implementation time. The actual cost to implement the service was £5,000 and we were up and running in less than 6 weeks.
Litigation in the USA is changing as robotic automation in case law research now provides the enquirer readings from legislation and law texts, examples of previous cases. It will also update you if there are any changes in the law or case decisions that may effect your case. The first ‘AI Attorney’ was deployed in the bankruptcy practice of Baker Hostetler, by May 2016 there were over 20 law firms in the USA with ‘Robot Lawyers’. These have now arrived in the UK with one law firm able to predict at what stage defendants are likely to settle claims, remember from the ‘Robot Wars’ article (July/August 2017) ‘…that any process where there is a predicted outcome can be automated.’
So how does this new technology impact 3rd parties and their use by credit management teams to collect debt? Forward thinking debt collectors are embracing RPA, like everyone else the need to drive down costs and improve service is no different with them, but with their clients deploying similar systems will there be such a high demand for this service other than the need for the ‘3rd party letterhead’ impact? Surely if companies get the collections strategies right with the predictability of outcome the demand must be reduced. Alternatively, will the 3rd party debt collection organisation become your collections team able to offer cheaper more effective collections than the slow ERP’s of the big corporates becoming functional specialists in collections. Will the AI Attorneys take over what is a very predictable process of debt litigation, what was an exception when a case was defended will these be dealt with through research and case histories as they are now in other areas of the law?
Ironically nobody can predict where this is going but what we can say that cost, efficiency and service will be the drivers, data gathering to drive more analytics to predict outcomes, more functions will merge as end to end customer management becomes more important, specialisms could be lost and where once we would moan about smart lawyers we will be saying the same about the data analysts as surely those skills will be in greater demand.