In a 2021 Lexop survey, 68% of respondents digitally paid their past due bills, suggesting that digitizing your process could improve your early-stage recovery rates. Payment collections software supports your digital collections strategy. It provides actionable insights and empowers your customers to self-serve. However, not all solutions are created equal.
Top-rated tools increase your return on investment (ROI) while reducing your collection operating expenses. Learn how to find the right platform for your business using these six debt collection and recovery software tips.
Six tips for buying collections software
Companies invest in debt management and collections systems to increase the number of repayments as part of a proactive collections strategy. Although Experian reports that "delinquency rates remain relatively low," rising interest rates and inflation may impact your customers' ability to pay. Accordingly, Expert Market Research (EMR) forecasts that the global debt collection software market will reach more than $6.25 billion by 2027.
Take a proactive approach with tools that engage customers and offer real-time insights. Select a solution that aligns with your goals, has a demonstrable ROI, and helps you personalize customer outreach at scale.
1. Outline your goals to achieve with collections and recovery software
Explore how payment collections software fits into your broader business outcomes. From there, think about the specific objectives it should accomplish. Look at your current collections analytics and see where your new system can add value.
Organizations seeking to follow best practices will choose a solution that will:
- Retain customers: Deploying early-stage collection efforts can preserve client relationships. Set a goal to decrease the number of lost customers during the collections process.
- Recover more revenue: Many consumers want to pay but just need a reminder or nudge. Create objectives to increase revenue sooner in the past-due customer journey.
- Reduce reliance on agencies: Evaluate your current rate of overdue accounts passed to a third party. Your new software should reduce this rate and keep more collection activities in-house.
2. Review current collections KPIs and define what progress looks like
Your key performance indicators (KPIs) and metrics show how well your collection and recovery techniques work. Think about your current KPIs, including rates and time-to-completion for each goal. Next, consider how these figures may improve faster after deploying a digital debt management and collections system.
Although there are many metrics your team may monitor, these three will show a noticeable impact after adopting the right payment collections software:
- OPEX for collections
- Customer retention
- % of revenue lost to agencies
3. Examine your collections strategy
A “reach, collect, and analyze” approach benefits your customers and brand. The right tools can humanize your methods and allow you to collect repayments digitally.
To improve your strategy, start by mapping out your stages of collection and identifying areas for improvement and opportunities to retain customers.
If you need help understanding early-stage collection best practices and developing a humane collections strategy, check out our free guide: The Strategy Playbook for Digital Collections.
4. Weigh the pros and cons of buying vs. building your solution
According to TransUnion, "Approximately seven in 10 collections professionals (69%) said technology solution spending will modestly or significantly increase in the next two years."
Costs can vary significantly between building your own infrastructure versus implementing a cloud-based system depending on your goals, and many cost-conscious collections professionals will seek to weigh their options carefully.
A custom platform can have higher upfront costs and take longer to deploy. If collections are a core business process, you may prefer this approach.
On the other hand, pre-built payment collections software allows you to accelerate your recovery process without a lengthy build and deployment timeline. It also provides access to professional implementation services and 24/7 customer support.
Work with your IT team to assess your capabilities and factor in:
- Problems your platform will solve
- Cost of building, deploying, and training
- Risks of self-management over third-party support services
- Benefits of building vs. buying your solution
5. Look for solutions with demonstrable ROI
Before investing in a new debt management and collections system, vet each one thoroughly to ensure a solid return. It's beneficial to take the time to review each platform’s performance metrics, including the number of self-cured past-due customers, the return on investment, and potential OPEX reduction.
Then, consider those metrics against the total costs and revenue related to your existing processes. Using those numbers, you can estimate potential monthly savings and repayment revenue increases with a new system.
Additionally, third-party vendors should offer validation of their success with their customers through case studies, testimonials, and metrics related to cost savings. For example, Lexop customers, on average, realize a 10% reduction in OPEX. However, some like Alterfina had a 25% drop in write-offs, while others achieved a 30% increase in team productivity. Interact with software providers to learn how the implementation process works and the types of benefits you can expect.
6. Evaluate your must-have features list
Tools that help your organization automate processes and empower customers are essential for an effective debt management and collections system. Ideally, your chosen platform should prioritize early-stage collections, allowing you to protect the customer relationship while reducing the average days to collect.
Consider platforms that make it easy to personalize email or text messages and automate various steps. More than three in 10 respondents to a Transunion survey said that their company uses text messaging to communicate with consumers, increasing 15% over 2019 rates. In addition, email outreach remains one of the best channels for debt collecting.
Online portals are also vital to the digital collections process. These give customers flexible options for repayment and encourage them to self-serve on their terms. Look for software with secure payment gateways that allow clients to pay online 24/7 or make flexible arrangements.
Furthermore, explore solutions that help you continually improve your collection and recovery efforts. It should have actionable analytics in an easy-to-understand format, including a dashboard with key insights. Plus, examine the types of reports available, such as data about past-due customer behavior and how many customers engage with your recovery emails.
Choose software that helps your team follow collections best practices
Reach and incentivize your past-due customers by choosing payment collections software like Lexop. It provides an intuitive platform to optimize your collections strategy and humanize your digital approach. Discover more debt collection and recovery software tips and learn how innovative tools can enhance your methods by talking to one of our experts.