The 2018 calendar year (CY18) may appear to have brought some financial optimism for some, however the horizon for a number of individuals, households and businesses will remain challenging.1,2
Although the slightly positive CY18 outlook could indicate the rate of consumers transitioning into financial difficulty may improve, the need for effective financial support programs remains unaffected, if not growing.
The drivers affecting consumer’s capacity to pay and customer vulnerability can be complex in nature, and it is prudent from an economic, social and brand standpoint for organisations to have a well-developed management and support framework.
Business drivers stimulating the need for a comprehensive support framework include:
Illustration 1: Debt Accumulation Matrix, illustrating Customer Health Relationship
In determining how one’s organisation responds to a customer’s financial health position and the resolution of their unpaid debt we see that a number of critical cornerstones need to be established.
At recoveriescorp, we consider the initial cornerstone for a company in building a framework for supporting customers experiencing financial difficulty is reaching an internal agreement on the business’ position regarding extending support to customers and the extent of the investment the business is willing to make in helping customers get back on track financially (articulated in a clear policy).
Further, it’s essential the business conveys with clarity how it classifies differing positions across the financial health spectrum, and the indicators it believes are sufficiently predictive and identifiable to be able to recognise with confidence where a customer may be financially positioned, as well as the rate of change away from their current position.
Investment in returning a customer back to financial health is usually centred around altering repayment terms and debt amounts, but may also extend to the provision of products and services at reduced cost or financial co-contribution. All of which have a measurable expense to the business. The broader the range of options, often the greater the cost to the business, but also the greater likelihood of finding a solution which enables the customer to resolve their debt, and move back towards a position of positive financial health.
We see that prevention is better than a cure, and that the avoidance of bad debt accumulation (or further bad debt accumulation), and supporting the financially responsible consumption of one’s product or service, is critical to helping maintain a customer’s overall financial health.
We emphasise the importance in ensuring businesses and their co-partners are alive to changes in a customer’s financial health position, through visibility over both active (i.e. voice contact) and passive customer interactions (i.e. payment patterns), to effectively modify the relationship accordingly.
In order to maximise the return of customers to financial stability, we believe it is important that the business sycronises its business capability areas (i.e. management systems, human capital, information and financial), to its policy position. This approach ensures that capabilities remain adaptive and in step with the continually changing debt management landscape.
At recoveriescorp, we believe that working with business partners who share the same vision for effective, customer centric debt management solutions is fundamental to success as it is the vision of a company that shapes the way in which it chooses to invest in moving forward, and sets the culture and values for its operating delivery rhythm.
An alignment of vision and values is central to internal and external stakeholder confidence - be it regarding customer experience, innovation delivery, brand care or financial performance. We see this as especially true as the corporate governance responsibility mandate continues to extend in nature to cover all aspects of customer interactions – from first party, to contingency co-partners, to account purchasers.
This new landscape demands a new approach and a call to action. Whether it be to address compliance obligations or to strengthen your position of corporate responsibility, building a framework to support your customers in financial distress is prudent, if not essential.
1 National Australia Bank, NAB Monthly Business Survey, November 2017
2 ABS, data as at 30 November 2017
3 Commonwealth of Australia, Corporate Responsibility: Managing Risk and Creating Value, p.22