Leveraging a Segmented Accounts Portfolio to Drive Key Analyses

Segmentation is a great tool to use within your collections department because it enables your business to tailor the collections efforts based on the payment behavior of your customers. It can also help you carry out other key analyses and add significant value with numerous key insights into your operations that will help make decisions within the organization. Below are 4 analyses that directly or indirectly benefit from having a segmented customer base.

1.      Customer contact prioritization

The main use of a segmented portfolio is to determine which customers should be prioritized when it comes to collections activity. One way to identify this is by using the size of the customer, measured on average annual billing, and how well they pay their invoices in relation to the due date of each invoice raised on the account. If it’s a high turnover customer with poor payment behaviour demonstrated over a longer period, the collector will initiate collection activities earlier and continue to chase on a more frequent basis. Identical customers but with good payment behaviour will still be contacted, however not as early or frequently. The other end of the spectrum is all your customers grouped together that make up little of your organisations annual turnover. Segmentation will drive these accounts to be subject to complete process automation, regardless of payment behaviour as the collector’s time is more effectively spent on higher turnover accounts. Almost immediately, this approach removes a high volume of customers from the collector’s workload to allow more concentrated efforts that will generate more cash collected.

2.      Customer payment performance indicator

Directly generated from the customer contact prioritization analysis, by using segmentation with the data behind it and creating labels to each customer, you can easily track and monitor if the overall payment behaviour of your customers is improving. Depending on the frequency of running this analysis, you will be able to see accounts shifting within the segmentation spectrum. If less customers fall into the poor paying boxes, it means they have consistently improved in paying their invoices against the due date, which originates directly from the efforts of the collector through increased and targeted collection activity.

3.      Balancing the account portfolios between collectors

Allocating the right number of accounts as well as different types of accounts to your collectors can be a challenging task. Finding the right balance to ensure accounts receive the right level of attention and expertise is crucial for the overall success of the team. With the segmentation label on the accounts, management can easily identify accounts that require the attention of an experienced collector and accounts that are more suitable for new or less experienced people. I.e. difficult customers with high turnover should not be given to a collector with low experience or a person still in their development and learning the trades of the job.

4.      Complementing capacity model

To understand how much cash on average each collector collects or how many people you need to collect a certain amount of cash, creating a capacity model is a great way to do so. This enables your business to be able to plan and recruit people on a proactive basis, to make up for any shortfall in staff. This becomes even more important if your business has a history with high turnover of staff. When you have determined the amount of cash each collector on average collects, you can exclude certain cash coming from customers labelled “good customers” who pay on time, as defined by the segmentation model. Reasoning behind this is that you can assume that cash would have come in regardless of the collector’s efforts. Assuming this, you can then further drill down within the capacity analysis to understand the true amount cash collected, deriving directly from the efforts of the individual collector.

Digital future

It is worth remembering that the arrival of new technologies such as “Robotic Process Automation” (RPA) and collector bots will have an impact on how businesses utilize a segmented portfolio. Issues regarding capacity or account split amongst collectors will become less relevant as the workload will be reduced due to the arrival of such automated technology. However, the level of adaptation of new technologies that can be used to drive account segmentation activities should depend upon your individual customer strategies. Not everything out there will be applicable to your strategies and relationships built with the customers.

Conclusion

What is very important to understand is that segmentation is not a one-size fits all and can be tailored using different information depending on the nature of the business and availability of solid data. Ultimately, what the segmentation offers is a wide variety of key insights that creates the foundation of multiple analyses that help the business to make educated decisions. Regardless of what industry you are in and the products you are selling, segmentation is a strong tool that turns knowledge about your customers into more effective collections across the board and most importantly, a healthy cashflow for your organisation.