Sopra Group Unveils Credit Market Research Headline Findings At Credit Summit
Credit collection survey shows major challenges and a 20% increase in cases, but no clear plans for dealing with the backlog.
Debt collection is getting slower, less successful and more resource-intensive, even as an almost 20% increase in debt collection cases is anticipated – but businesses are struggling to identify a 'best way forward.
European IT services company Sopra Group, a provider of credit collection management software, has today released new survey findings indicating that three quarters of companies are experiencing a number of challenges in their collections process.
The enormous pressures on the debt collection function, saddled with an increasingly failing debt recovery infrastructure, combined with the expectation off a huge hike in the number of debt recovery cases has all the makings of a coming credit collection 'Perfect Storm'.
The survey, conducted by independent research specialists, Vanson Bourne during April/May 2012, targeted senior finance professionals in debt collection agencies, financial services and retail industries.
The survey reveals that the process of collecting money owed is becoming slower, less successful and more resource-intensive – and worryingly, this crisis situation is expected to worsen, with respondents anticipating a 20% increase in debt collection cases in the next year. That's to say the average increase is expected to be 18%, but staggeringly, 43% expect the volume to be even higher – over 20%.
The major challenges confronting those responsible for debt collection were identified as:
• 85% agree debt is taking more people/resources to collect
• 83% confirm debt is costing companies more than ever before
• 81% agree costs are escalating because debt collection is taking longer
• A further three quarters (74%) confirm margins are being impacted due to extended payment timeframes
The results strongly suggest that the current way of doing things isn't working, yet overall there was no consensus on a "best way forward" for addressing these challenges or meeting the feared increase either. Companies seem to be looking at attacking the problem on several fronts at the same time, with half looking at replacing and/or outsourcing (54%) their software solution. A similar number want to streamline and automate existing processes (54%), while just over half (53%) expect the solution will involve hiring more people.
Asked to name the greatest challenge in debt collection in the next twelve months, the response that came back repeatedly was the difficulty in actually recovering debt. The most common comment:
"Getting people to pay is our greatest issue." That's a problem compounded by the recessionary pressures the country is under. One respondent sums it up: "Increasingly, there are more debt cases that CANNOT pay, rather than simply won't pay."
Overall the issue that respondents thought loomed largest was, echoing the tenor of the survey questions, the inadequacy of systems and processes and the lack of resources. Thus, "increasing costs and overheads involved in collecting debts," is a recurrent cry while "Our current systems are inflexible - making changes is very difficult/not possible" another.
Elliot Howard, Director at Sopra Group Software Solutions in the UK believes that the survey demonstrates the crisis that the industry as a whole faces.
"This survey has highlighted the fact that the challenges businesses face with debt collection are immense, and the debt collection situation is rapidly worsening. The high number of respondents recording big challenges here is extraordinary. Debt collection is absorbing more resources and increasingly becoming more complex and difficult. Added to this, the number of debt collection cases is set to increase at an alarming rate. It's a grim outlook for the debt collection industry unless some radical process overhaul and technology spend is set in motion. Otherwise, business debt will become unmanageable."
To underline the significance of the survey results, Vanson Bourne Research Director, Graham Opie, believes the results recorded in this survey carried out by his team are unprecedented in some of the strikingly high numbers it records – in particular on the challenges confronting those responsible for debt collection.
The full survey report is expected to be available mid-June.
Register to receive your free copy here