The pandemic has changed the way businesses operate over the last couple of years, to a great extent. With the various unexpected challenges brought on by the pandemic, most businesses had to learn how to adapt themselves to the ever-changing situation quickly and effectively – in order to survive and stay abreast of the situation. By embracing agility and innovation, most companies have transformed themselves for the better.
Numerous companies and industries – ranging from healthcare to education to entertainment – have seen drastic shifts in the way they operate. The same is to be said for the finance sector, which has been affected in several ways. The area of debt collection in particular has seen its fair share of challenges.
In this article, Sahan Perera – the Operations Manager at LoanMe – takes a look at how debt collection has been affected by the pandemic and discusses what measures can be taken by companies in order to recover debt efficiently.
How Has the Pandemic Affected Debt Collection?
One of the biggest shifts in behaviour that could be observed during the pandemic was the massive surge in debt and borrowing. The pandemic was a difficult period of time for most people, with many of them facing severe financial hardships. Many companies announced major layoffs and pay cuts, leaving people unable to acquire the income they needed to continue with their lives. As such, many people were forced to apply for loans and also found themselves in situations where they were unable to pay off their existing debt.
With regard to the issues faced by debt collectors, communicating with borrowers proved to be more challenging during the pandemic. If borrowers were unreachable via the contact details that were provided by them, debt collectors faced limited options due to travel restrictions and similar challenges. This in turn slowed down the debt collection process significantly.
Making payments was yet another challenge. Most borrowers showed reluctance to head outside and found themselves unable to make the physical payments that they were used to in the past – such as going to the bank to make a transfer or handing over cash in person. In such cases, borrowers had to switch to alternate methods of payment such as online fund transfers and digital payments – to ensure they did not compromise on their safety.
How to Ensure Efficient Debt Collection During the Pandemic
Despite the challenges caused by the pandemic, it was crucial for companies to ensure that debt collection continued to take place seamlessly. As such, debt collectors had to adapt to the situation at hand by altering the way they were used to operating. Below are a few tips to keep in mind when collecting debt during the pandemic.
1. Assess your accounts and your receivables:
An important step is to constantly keep an eye on your receivable portfolio and be aware of the accounts that are on your collection list. You can categorise your accounts in order to figure out which approach will work best for each account. Segregating your list into “good accounts”, “fair accounts” and “poor accounts” might be a good idea – so that you know how to allocate your time and effort.
2. Consider renegotiating payment terms with borrowers:
The pandemic has been a tough time for everybody and you need to keep in mind that your borrowers are facing massive challenges in their lives. You need to realise that despite your reminders and constant following up, some borrowers simply might not be in a position where they are able to pay, given the situation. In such instances, remember to be flexible and talk with your borrowers to negotiate their payment terms – in a way that benefits both parties.
3. Encourage digital payments:
Make sure customers are aware of the various ways that they can make payments, even during the pandemic. Address any safety concerns that they may have and encourage them to make digital payments, taking them through the process of what needs to be done if they have not done it before.
4. Streamline your collection process:
It is very likely that most of your business operations & processes are not the same as they were prior to the pandemic. Make sure to identify any post-pandemic changes and try to iron out any hiccups that you now face – to ensure that your collection process is as efficient as possible, even during the pandemic.
5. Maintain constant communication:
Another important thing to do is to maintain constant communication with the customer, even if they are unable to make the due payments immediately. Make sure to listen well to what the customer is saying and try to work towards a solution together. By maintaining constant communication, you are able to provide reminders on the due payments as well as strengthen your relationship with your customer. If customers are unreachable via telephone, remember to make a note of it and escalate it, instead of putting it on the back-burner.
6. Record everything you discuss:
Maintain detailed records of everything that you discuss with your customer – verbal agreements in particular. It might even be a good idea to record any phone calls that you make, in case you need to refer back to what was discussed and agreed upon. You may also want to maintain a separate folder for each customer, to help you manage your customer information and keep track of everything that you’ve discussed with them.
7. Aim for shorter collections:
Debt collection only becomes trickier as time passes. Especially during the pandemic times, it is quite important that you collect pending payments as soon as possible – whilst borrowers are still in a position where they are able to pay.
8. Always be pleasant and professional:
No matter what the situation is, it is crucial that you conduct yourself in a polite yet firm manner at all times. The pandemic is a stressful time for everyone; make sure you do not lose your temper with the customer, no matter how frustrating the situation is. Always maintain professionalism while communicating and keep your conversations as constructive as possible.