Collections made easier – protecting businesses against financial risk

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Junior Biola | CEO | EasyDebit | mail me


Consumer debt is increasing – with worrying effects for companies. Strike Date Optimisation may be the single most effective tool standing between a business that flourishes in a difficult economy, and one that’s left floundering with a growing debt book.

Much has been said about the challenges facing South African consumers at present. As we grapple with job losses and the salary cuts that still affect many following lockdowns, we also face rising prices in all areas, from fuel to food. A significant interest rate hike has further disrupted household budgets.

Poor collections lead to poor cash flow

The fact that South African consumer debt grew to R1.97 trillion during the period January to March 2022 (according to The Consumer Default Index (CDI) May 2022, published by Experian South Africa) is proof of just how much consumers are struggling right now. But, if customers are fighting an uphill battle, so too are the businesses that serve them.

The same CDI report reflected that a growing number of people are defaulting on loans, with R18.11 billion in value defaulted during the period January to March 2022. Naturally, the effect on a company is devastating.

Poor collections lead to poor cash flow, which in the worst-case scenario impacts their ability to keep operating.

A striking solution

Fortunately, there is a solution available to increase collection success rates, in the form of Strike Date Optimisation (SDO).

Through customer information intelligence, this automated once-off process identifies the dates that clients are most likely to have funds available in their account. Armed with this information, payment collection becomes far more effective.

As the best dates are provided in real-time, the strike date can be confirmed with the client during the onboarding process.

On existing accounts, SDO can be carried out on those where collections are failing due to insufficient funds. This is how it works: SDO uses data collected by intelligent software to provide three optimal strike dates for the target bank account.

The technology can be used either in batch format or individually, so that companies can access the information around customer accounts as they need it. Plus, they’ll have this information at their fingertips instantly.

Amplifying effectiveness

Effective though SDO is, it becomes even more powerful when paired with DebiCheck. Like SDO, the issuing of DebiCheck mandates is a once-off process.

Customers electronically authenticate debit order mandates that have been registered with their bank. Once a customer has approved the mandate for the debit order, payment can then be collected from the customer’s bank account without being disputed.

It’s also easy to implement: DebiCheck assists with registering the customer’s mandate with the bank, once the customer has approved it (either in person, with a smart POS device, through their banking app, at an ATM, or via mobile USSD prompts), the company can start collecting their funds through DebiCheck’s debit order collection facilities.

Another advantage? The Debi Check mandate service takes place in real-time, offering same day authentication options. This adds up to greater convenience for customers, because they have upfront knowledge of payments, as well as companies, which have more efficient collections.

Although both services can stand alone, the success rate of collections increases dramatically when they are combined. Once a company has verified the customer’s account and proceeded with mandate authentications with DebiCheck, SDO can be implemented to find the best day for a successful debit to take place.

The result? A streamlined collection process – from start to close of each transaction – which leads to reduced payment collection failures, and therefore improved cash flow and monthly revenues.

In conclusion

There are also important implications for the client relationship: DebiCheck builds trust and confidence in the business because customers know their payment is coming beforehand, and they know it will be made safely.

At a time when it’s difficult to create new business, the most efficient growth strategy may lie in leveraging the business a company already has by increasing collection success rates and saving on the costs of failed debit order collections. Implementing the combined services of SDO and DebiCheck is one of the simplest ways of doing this.


 



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