Earlier this month, the BBC announced it will be launching an investigation into how its licence enforcement officers collect fees. Here, Lloyd Birkhead, managing director at Grosvenor Services, part of specialist outsourcer Echo Managed Services, discusses why businesses should seek to strike a balance between effective recovery of debt and the fair treatment of customers.
‘Ethical debt collection’ might sound like a paradox to some but it needn’t be. For us at Echo, experience tells us that when it comes to the recovery of money, quite often it can be just another step in the customer journey. Recognising this is more important now than it has been since the recession, with household debt levels higher today than they were in 2008. Businesses need to ensure their debt recovery practices are fair and considered or risk damaging relationships with customers. So where are companies going wrong?
The current shortfalls of businesses
Debt recovery is a lot more common than many of us realise – research has found that over two-thirds of adults will, at one point in their lives, end up in arrears. This means that getting debt recovery right is absolutely crucial, yet some businesses still seem to be falling short.
Inaccurate billing is a major issue for companies when it comes to the recovery of monies owed. Issues such as double-charging or holding outdated / incorrect customer information are commonplace. This can often plunge customers into debt involuntarily, or lead to ‘protest debt’ – the refusal to pay, usually by more affluent customers. These mistakes frustrate customers and jeopardise their loyalty, while at the same time threatening a company’s reputation.
Aside from billing issues, debt collection that is overly overly-zealous, which includes excessive contact, was found in our ‘Counting the cost of debt recovery’ report to leave customers feeling both frustrated and harassed.
And the consequences of poor debt recovery practices?
Getting debt recovery wrong is costly on two fronts:
- Financial implications
- Impact on reputation
Debt is often only a temporary state, so companies should be looking to balance the short-term payment gain against the more long-term value of the customer – or end up losing the custom altogether.
How businesses can improve their debt recovery approach
It’s never too late for businesses to recognise the error of their ways and adapt more customer-friendly debt recovery practices. Here are our thoughts around the top ways to improve:
- Open and proactive dialogue with customers
- Using doorstep visits effectively
- Offering choice with communication
- Agents with the knowledge and empathy to help
An effective debt recovery strategy will be customer-focused and ensure that money is retrieved in a fair and ethical manner. With rising household debt, now is the time for businesses to review their current practices and ensure they’re meeting customer expectations. In doing so, they’ll not only enjoy strengthened customer relationships and better engagement, it will literally pay-off too, with more customers being able to repay debts and pull themselves out of arrears.