The lifecycle for most customers borrowing money from a lender is a straight forward one. In very simplistic terms – the customer borrows money, customer pays their monthly instalments, loan is settled. As many businesses know all too well, that ‘happy path’ can become unhappy quickly, especially in the current climate.
Contacting customers who have defaulted on their payments is vital not only to drive revenue back into the business, but also for the wellbeing of your customers. People who fall into arrears don’t do it on purpose, they’ve hit a stumbling block and 99 times out of 100, they need some help.
Gone are the days of ‘hard collections’ (and good riddance too) but it’s still important to speak with these customers and understand the situation they are in and, most importantly, what you can do to help them. The first 30 days after a customer falls into arrears are by far the most critical for many reasons: A customer may have changed their bank details or pay day – By contacting these customers early, you can get them back on the ‘happy path’ quickly. That first 30 days is vital as even though they may not be able to bring their payment up to date straight away, you can get it scheduled for their next pay date and get them back on track.
A customer might have lost their job – These customers need that extra helping hand, they need to know that you’ll work with them. You’d be naive to expect them to pay up but by speaking to them and telling them “it’s ok, we’re here to help”, it instantly builds that trust. You can arrange a date to get back in touch, keep them in that communication cycle and be there when they’re able to make payments again. Leave them too long and they’ll bury their head in the sand and become another late stage debt figure.
A customer might have found themselves in a position where they have mounting debt – They’ve caught themselves in a cycle and have reached that point where they can no longer borrow any more. With multiple lenders calling for payment, it’s important to speak with that customer early. If another company agrees a plan which takes most of their disposable income, that leaves very little for you.
All of this illustrates how vital it is not only to speak with that customer but speak to them quickly. You might have an automated arrears SMS which would make Shakespeare envious, but nothing beats a conversation. At TieTa, we understand the importance of speaking to customers and doing it quickly. From our vast experience, we have seen that the longer you leave a customer alone after their payment fails, the less likely you are to bring them back up to date. The first 30-day window is the most critical to effectively bring revenue back into the business and most importantly, give your customers the help they need