Resource Planning

An effective collections department is one that is able to minimise the organisation’s bad debt whilst optimising available resources in favour of ‘the bottom line’.

In this tip of the month we will look at resource planning in a centralised outbound collections department and how a collections manager should go about getting the balance between the number of collectors and number of delinquent accounts right.

Collections managers are often at a loss when required to calculate the number of collectors required for the number of delinquent accounts in the collections department. In order to determine the number of collectors required in relation to the number of accounts, the collections manager will need the following information:

• Number of accounts

  The number of accounts means the number of delinquent accounts that require treatment within the month in accordance with the collections strategy.

   

• The ‘average collector work time’ per action per account

  The ‘average collector work time’ per action is calculated from the moment that the account is presented to the collector until the collector ‘off-loads’ the account. This average is expressed in minutes. The average collector work time will vary from organisation to organisation and will depend on a number of factors, such as:

  • The contact rate – this is the number of calls answered as a ratio of the number of calls made. The higher the contact rate, the higher the collector’s productivity, increasing the ‘average collector work time’ per account.
  • The right party contact rate – this is the number of contacts with the accountholder as a ratio of the number of calls answered. The higher the right party contact rate, the higher the ‘average collector work time’.
  • Use of technology such as predictive diallers – although the use of a predictive dialler will increase the contact rate, it will eliminate preparation, dialling and ringing time and thus reduce the ‘average collector work time’ per account.
  • Delinquency level of account – the higher the delinquency level of the account the more difficult it is to collect on the account and hence, the higher the ‘average collector work time’ per account.
• The average number of actions per account per month

  The average number of actions per account per month relates only to actions that have to be performed by a collector on the account within the month. In most instances the action will be a telephone call.

   

  The average number of actions per account per month will depend on factors such as the delinquency level of the account, the organisation’s collections strategy, the organisation’s business rules regarding the diarising of accounts for follow up action, the contact rate and right party contact rate.

   

  The average number of actions per account per month is based on historical data and is calculated by dividing the total number of actions performed by collectors in a month by the total number of delinquent accounts that required treatment within the month.

   

• Available time per collector per month

   

  The available time per collector per month is expressed in minutes and is calculated by multiplying the number of days that a collector works per month by the number of hours the collector works per day. The result is then multiplied by the number of minutes in an hour. A collector typically works 21 days per month and 6 hours per day. The available time per collector per month is therefore 7560 minutes (21 x 6 x 60).

   

  For example, if there are 200 000 accounts in collections every month and each account is actioned 1.6 times per month on average and the ‘average collector work time’ per action per account is 3 minutes, it will require 960 000 minutes to work through all the accounts in that month (200 000 x 1.6 x 3). In this example, the number of collectors required to work 200 000 accounts will be 127 (960 000/7560).

Proper resource planning is crucial to the overall profitability of the organisation. An excess of collectors directly affects the cost effectiveness of the collections department. A shortfall of collectors, results in accounts not being worked serving as a precursor to bad debt levels spiralling out of control.

Charl Van Rhyn is a Senior Consultant at PIC Solutions, the largest customer management solutions company based in the Southern Hemisphere. He has over 8 years of credit and risk management experience as a practising attorney, specialising in collections during all stages of the delinquency life cycle. At MBD Attorneys, a leading South African debt collection law firm, he served both in the capacity as Director Litigation and Senior Accounts Executive. Key responsibilities included the management of key business relationships within the banking, financial services, furniture retail, telecoms, utilities and health & leisure industries. He holds a B. Juris and LLB degree from the University of Potchefstroom. He is an admitted attorney of the High Court of South Africa and a member of the SA Institute of Credit Management.

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