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4 Vendor Management Best Practices for Collections and Recovery

Finding, verifying, and onboarding a new collections and retrieval provider isn’t easy or quick. You go to the trouble of sifting through all potential vendors, evaluating them, weeding out those with red flags, and finally committing to onboarding a vendor. So whether you’re outsourcing debt collection or adding new debt collection technology, you want to make sure those hard-earned vendor relationships work well for you and last a long time.

Want strong supplier relationships? You must have strong skills in recovery and management of recovery providers. How you manage these suppliers will have a direct impact on the success and sustainability of these relationships.

Good supplier management is not an easy task. Creditors who are too prescriptive can harm their relationship with sellers. Those that aren’t prescriptive enough can put themselves at risk of regulatory or reputational damage. That’s why it’s essential for collection and collection managers to open their channels of communication, keep those channels open, and keep an open mind if they want to strike the right balance.

Here are four best practices for managing debt collection vendors that you can use to set up your vendor relationships for long-term success.

1. Communicate clear expectations to suppliers early and often

Collections and collections providers need to understand exactly what their creditor customers expect of them from the start of the relationship.

If you use multiple vendors for the same process (e.g. a collection agency), it helps to standardize your MSA/SOW/SLAs, says Jeremy Ruth, senior manager of default account service at Arvest Bank.

But don’t just pass on those expectations and expect them to be met. Collection and recovery managers should work with their suppliers to create those expectations, Ruth adds. This way you and your suppliers are on the same page.

Another easy way to express expectations is to create and share a schedule of deliverables, says Bekah Luebcke, vice president of operations at Crown Asset Management. Collection and recovery providers should be able to understand performance and compliance expectations – and whether or not they are meeting those expectations – at a glance from their dashboard, adds- she.

2. Your Collectibles and Salvage Sellers Have Expertise – Use It

It’s critical that collection and collection managers treat their vendor partners like experts, says Carri McQuerrey-Funk, head of vendor management and initiative execution at Citizens Bank. She tells her supplier partners to “tell her where [she’s] be stupid”, and cautions collection and salvage providers against feeling like they “know it all”.

“You need an expert, and he is an expert,” McQuerrey-Funk says. So when a vendor partner gives you advice, you might want to follow it.

It is also a mistake to try to offload the risks onto your suppliers. Not only is it no longer possible for creditors to outsource their risk, but trying to do so will only sour your relationship with your suppliers.

The best approach is a “shared risk/shared success” approach to supplier management, advises Ruth. “You can’t look at it as if you’re going to transfer the risk to [your vendors]. It’s a one-sided relationship.

3. Grow the conversation, connect the experts

An ongoing relationship with a collection and collections provider typically goes through two parties: the provider’s customer service manager and the creditor-customer’s provider manager. It’s a great way to keep the relationship organized, but sometimes it’s not enough.

Connecting business units and SMEs can help ensure that nothing gets lost in translation, says Luebcke. Some issues can only be resolved through communication between business units rather than through the designated relationship manager. It will save time and resources if the seller’s SME can speak directly to the creditor-customer SME, so don’t be afraid to take on the challenges of their silos and get the opinions of the real experts.

4. Go back to on-site audits

In the past, this would have been obvious. But after more than two years of the global pandemic and a major shift to remote working, many companies have kicked the habit. In fact, the number one question from the audience during the iA Strategy & Tech Vendor Management Masterclass webinar series was whether or not creditors conducted on-site visits.

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McQuerrey-Funk, Ruth, and Luebcke, as well as TR Brown, vice president of consumer finance at the SmileDirect Club (all of the speakers in this aforementioned webinar series), all agree: If it’s for sure, those responsible recovery and recovery should carry out on-site audits.

On-site audits allow you to assess your supplier’s readiness in a way that remote audits cannot. If you’ve provided the agenda early enough, your supplier partner should have no trouble getting all the pieces in order, including getting the right staff into the office before your visit.

If your supplier partner is disorganized during an on-site audit, for example, if they do not have adequate staff to answer questions, this indicates that you may need to investigate further whether they are operating or not. as prescribed by your SOW. It is especially important to visit the site when you plan to audit new policies.

No vendor is perfect, but by following these four tips, collection and recovery managers can have a better chance of motivating vendors to succeed and extending the success and life of any vendor relationship.

To learn more about successfully managing your vendors, check out The Vendor Management Masterclass II.

Bonus read: Creditors: can you outsource risks by outsourcing collections? Not anymore.

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Are you interested in digital collections and recovery strategy best practices? If so, you can find the (free!) iA Strategy and Tech A Short Guide to Digital Collections and Recovery Strategy Best Practices in 2022. You can find resources like this as well as the latest trends in collection and recovery strategy, digital debt collection, vendor management and compliance in the iA Strategy and Tech newsletter. To receive this information straight to your inbox, sign up here.