With chargeoffs historically high, debt volumes up and liquidation rates down, choosing whether to invest in technology or stand pat has taken on grave importance.
Companies that choose to pay for new technology believe it will help them cope with the effects of a brutal economy and be ready to flourish once conditions improve. Those who decide not to instead focus on finding ways to maximize money coming in while minimizing what goes out. Their concern is that taking on such an investment could be financially devastating.
At Oliver Adjustment Company of Kenosha & Racine Inc., a Kenosha, Wis. agency: “It’s not been record years of losses but we began noting in the first part of 2009 that things haven’t been what they were the last few years,” Gloria Gerber, company president, tells Collections & Credit Risk. “We saw [in 2008] things beginning to decrease. But we’ve been very fortunate to stay above water.”
A year ago, Oliver Adjustment, which collects mostly medical debt, began using Bloodhound debt collection software by Manitowoc, Wis.-based Roydan Enterprises Ltd., then implemented Roydan’s hosted dialer in August. Quickly, Gerber says her three full-time collectors were comfortable with the new technology.
“Nobody likes change, but our collectors had no problem switching. It allows us to get through a lot of files per day. It can go through thousands of people a day,” Gerber says.
The Bloodhound software is designed to simplify the data-entry process by searching for matches as account information is entered. Collectors can work accounts quickly while the collection agency software does most of the work, according to the company, as the software automates repetitive tasks.
The company decided to rent seats with Roydan’s hosted dialer instead of investing in its own automatic dialer, which can run “many thousands of dollars,” Gerber says. “We’re a small agency and this really fit us great,” she adds.
Within the last four or five months, Oliver Adjustment reported an increase in revenue and Gerber believes it is because of the change the company made in its technology. “It is allowing us to implement new things and to do more with the same amount of people. It streamlines things.”
As of October, Oliver Adjustment Co.’s net income was 6% higher than it was the same time a year earlier. “We believe the new software and the dialer has everything to do with [the increased net income] because the economy hasn’t gotten any better,” says Gerber, who has been with the company for more than three decades.
Gerber and her partner, Chris Cope, bought the previously family-owned agency in 2006, when the company used Linux-based collection software. They contemplated switching over to a Windows-based system since they acquired the company.
“It was something we wanted to do but had to wait for the time to be right. Of course, most people would make that decision when things are going well, but it gets to a point where a change has to come and we felt very strongly about the software being a positive for us. We were in a position where we could do it, so what’s a better time than now?” Gerber says. “It was one of those things where you have to spend some money to make some money,” she adds.
Larger Volume, Smaller Staff
Higher volumes and fewer employees led Mike Mathis, president at Sentry Credit Inc., to invest in new technology. Mathis says the Everett, Wash. collection agency has “without a doubt” felt the effects of the economy.
“We have triple the volume in placements than we did in ‘07 and we are managing it with probably 5% less employees. This is a situation that can force a lot of agencies that didn’t get out in front of this to go out of business,” Mathis tells Collections & Credit Risk.
Sentry Credit has been with LiveVox Inc., a San Francisco-based provider of hosted-dialer products and services, since 2008 when the company’s volumes “were hitting crazy levels and we were trying to figure out how to manage increased inventory while increasing liquidations,” Mathis says.
Last October, Sentry Credit began using LiveVox’s Quick Connect feature, which enables companies to connect the call with an agent prior to connecting with the customer, thereby eliminating lengthy pregnant pauses associated with dialer-generated calls that can result in high abandon rates.
In the past, the company would not leave messages on answering machines, opting instead to disconnect in an effort to boost call volume, Mathis says.
Quick Connect “helps us generate return calls. What we were relying on previously were people with Caller ID seeing our number and calling us back,” he says. “It takes longer to get through the jobs when every answering machine is being transferred, but it has increased our return-call rates.”
During a month-long test of Quick Connect, Sentry Credit experienced a 17% increase in inbound call volumes that it largely attributes to the use of the product. “Applying our normal conversion rates to these contacts, I see this as a winner,” Mathis says.
Sentry Credit operates call centers in Everett and Vancouver, Wash. The company employs approximately 250 employees, with 185 of them being agents. Sentry Credit specializes in post primary credit card debt, auto deficiencies and retail installment loans. Three-quarters of the company’s revenue is generated by post-primary debt, with the remainder generated from primary placements.
Adoption of the new technology was an easy decision to make for Sentry Credit because there is nothing to buy. The company pays a per-minute fee to use the service.
“There is no capital investment on our part and we’re able to handle the sheer volume of accounts with minimal staff. That’s pretty valuable, especially when liquidation rates have dropped anywhere between 40% and 60% for our company since the beginning of ‘08,” Mathis says.
“If we’re generating more return calls and if we’re achieving our typical conversion rate, then obviously it would increase our revenue,” Mathis adds.
An Eye On The Future
DRS/Bonded Collection Systems has been using the products and services of CR Software LLC, a Fairfax, Va. financial software provider, for approximately 14 years. This month, the Cincinnati collection agency switched from CR Software’s Platinum collection software to its Titanium ORE system.
DRS/Bonded has another location in Indianapolis, along with the Ohio-based headquarters. The company employs approximately 100 employees, including 80 collection agents. All of DRS/Bonded’s paper is in-statute and primarily consumer loan, credit cards private label and some utilities.
Matt Alkire, vice president of operations, tells Collections & Credit Risk that his company continues to perform satisfactorily despite the troublesome economy. As with Sentry Credit, DRS/Bonded’s volume is up, but its liquidation rates are down.
“Our revenues for the year so far are up compared with 2008, but our liquidation percentage is down. Volume is dictating our revenue right now. If we didn’t have the volume of business that we do, it would be really tough in this economy to function,” Alkire says. “If you’re an agency that has access to volume of business, you will be OK as long as you’re watching your costs and efficiencies from a volume standpoint.”
Training on CR Software’s Titanium ORE system began in November at DRS/Bonded, and Alkire expects the company to be running “full-steam ahead” shortly after implementation. Alkire says the company not only decided to improve its technology because of the increased volume, but because of the system’s enhanced security and flexibility.
“This will be a much more secure system. The data is not only secure at rest but also in transit.”
Because of the system’s flexibility and open-receivables environment, DRS/Bonded can rely on its own in-house IT personnel to write programming instead of having to use CR Software’s staff.
“We’re able to use our own staff to adapt and adjust our system to our needs. It takes the ceiling off, too. Platinum is a good platform, very stable, but there are times we do push it’s limits,” Alkire says. “We felt we had pushed its limits enough that we needed to jump on Titanium so we could be ahead of the game coming out of this economy.”
Not only does the software help the agency cope with current conditions, DRS/Bonded expects CR Software’s Titanium to better position the company for the future.
“Our thought was to try to leverage ourselves during a down economy to put ourselves in position, so that when all this rebounds, we have stronger technology, a more efficient system, and better relationships with our vendors,” Alkire says. “So when the volumes are still where they’re at now but the economy starts to rebound, we’re ahead of the curve when it comes to our competitors.”
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