Technology, now or never

Given the extent to which we use technology in organisations, neglecting how you can use technology in the crucial function of recoveries is a costly mistake

Technology has changed dramatically the way we live and work. Organisations in diverse industry sectors benefit immensely using technology. It is difficult to think of any organisation, event or a product that is not using technology. On the other hand, we are going through one of the most challenging time periods in human history. Organisations are struggling to face the economic crisis as the pandemic continues threatening human lives. This short article attempts to discuss ways and means of using technology during this time period particularly in managing the receivables and customer relationships. The writer believes that practicing managers, entrepreneurs and policy makers will benefit from the article. 

Challenges faced in recoveries 

The pandemic situation has made recovery officers restrict their usual field visits. Similarly, the number of customers visiting physical outlets of organisations has come down drastically due to health risks, regulations and inconveniences. Not meeting your customer physically can lead to various negative consequences especially when they face difficulties in surviving. 

Banks whose primary function is financial intermediation are on centre stage during this time period. What they lend back to business firms is customer deposits for which they are responsible to return with interests. Globally, the non-performing loans are increasing and dozens and dozens of countries are now reaching double digits. When non-performing loans go up, the portfolio quality goes down. Banks may struggle to meet the regulatory guidelines and have to face stability related issues such as low profitability, low investor confidence, downgraded credit ratings, etc. 

Business organisations in general face the tedious task of continuing with increasing receivables. When a long-standing customer does not pay on time and struggle, you cannot stop giving further credit as it affects your sales and also the relationships. Where to draw the line is a puzzle when you are trapped with increasing outstanding figures in receivables especially when they are your important customers. 

All in all, it is quite evident that organisations should pay more attention to recoveries given the uncertain circumstances the whole world is facing. The aim of this article is to educate the readers as to how technology can assist their organisations in the crucial function of recoveries. 

What is a DMS? 

A DMS or a delinquency management system is a digital platform where all your receivables are monitored throughout the life cycle of the recovery journey. It is an automated process where the monitoring begins even before a receivable is tagged as an overdue or risky. This proactive way of monitoring and follow up of your receivables using a DMS offers multiple benefits to the organisation. 

A typical DMS comes in modules as a pluggable solution to your central data warehouse, ERP or the core banking system. Infographics and user-friendly dashboards can provide easy to understand and important insights with regard to your business. Modern DMS comes with latest technologies such as robotics process automation, machine learning and chat bots, etc. The vendor may advise your organisation with how many modules you can start automating your receivable management process based on the objectives, affordability and priorities of the organisation. 

Can your organisation implement a DMS? 

It depends on the total number of customers you handle, the volumes of transactions, risks of defaults, etc. No business organisations would want to see that sales carried on credit are not settled. Similarly, collecting the receivables on time is also quite crucial because of the time value of money. Further, on time and effortless recovery can strengthen the relationship with your customers. Managing overdue accounts is a hazzle to your employees. It is a stressful job that demands patience and empathy. Automating the recovery process of your organisation by implementing a DMS can remove the inherent unpleasantness of recoveries. It will enable your employees to engage more with customers to offer a better-quality service. 

A common problem most of the readers may have is whether it is worth in investing in a DMS. What will be the payback period? The answer depends on how smartly your organisation can write off bad loans, how best you appreciate proactive measures that can be taken than struggling with critical issues every day, how you care your customers and the relationships built, your attitude towards employees and owners of the organisation, etc. In short, given the extent to which we use technology in organisations, neglecting how you can use technology in the crucial function of recoveries is a costly mistake. 

Given the market conditions, managers should pay more attention to maintain healthy recovery ratios while maintaining customer relationships intact. A DMS can offer you immense benefits in this. 

Benefits of using a DMS

Having a high employee turnover in sales and recoveries is not a healthy situation for a business organisation. However, the ground reality is that even in your organisation these two departments may record the highest attrition. In addition to the increased recruitment and training cost and productivity losses, a major challenge an organisation will face is the loss of knowledge. Scholars highlight the risk of losing knowledge especially the tacit knowledge. Tacit component of the knowledge needs not to be high tech. 

Undocumented customer knowledge a staff member uses in performing sales and recoveries can be considered as tacit knowledge. There is no other easy way than capturing this knowledge using technology. A modern DMS can identify customer and/or employee behavioural patterns and share such knowledge which will eventually become common knowledge and best practices. 

DMS will enable your organisation to experience a positive bucket movement meaning receivables in different buckets based on the age of the debt will show improvements by falling in to less risky buckets. 

Automated assigning of recovery leads and follow up process can remove a huge burden from managers who are heading this never-ending exercise of recoveries. Some DMS solutions come with their own algorithms to suggest which accounts are to be given priority based on risk matrix scores. 

How to select the right vendor? 

Needless to mention that an organisation should look into multiple factors in selecting a technology vendor. A time-tested track record, local reference sites, flexibility in terms of design, cost and implementation, after sales services, cost of the solutions, charges for customisation and the basis, transparency in affairs, hidden costs are some of the factors. Managers of corporate organisations should also pay attention to the forex savings in procuring local solutions. 

A timely need, now or never!

Having discussed the difficulties your customers are facing, the drastic increase of defaults and connected risks and the increasing stress sales and recovery employees are facing, there is no better time than now to begin investing in technology. This can streamline critical processes before things go beyond your control. As individuals and managers, some of us do not pay that much of attention to be pro-active. Similarly, we do not prefer preventive measures and unintentionally give priority to routine work piling up due to own lapses. 

A DMS can bring the benefits of being pro-active to your organisation. You can take appropriate follow up measures even before things go wrong. A state-of-the-art DMS does not require employee intervention. The relevant people including your customers and employees are automatically notified. Non-responding parties are escalated to higher authorities through a full automated process. For the benefit of the readers and to understand the volumes you can automate the locally developed Affiniti DMS is scanning portfolios worth in excess of Rs. 650 billion on a daily basis and that again is only in four banks and financial institutions.

Imagine, the problems the organisations will face if not for automation through DMS. This is the best time to be wise technology wise. Like in many other areas of your business where you use technology to enhance productivity, it is essential that you automate your receivable management function to make your organisation resilient in the crisis. 

(The writer is a sales and marketing professional specialised in the domain of fintech solutions with a track record of 16 years. He is the Director/COO of Avonet Technologies, the company known for its award-winning AFFINITI software solutions. He is graduate in business management from Monash University, Australia and holds an MBA from the Postgraduate Institute of Management, USJ, Sri Lanka. His email is [email protected].)