The Three “R’s” of BHPH Collections

by Chuck Bonanno | Vice President / The Leedom Group

The three R’s of BHPH collections are not reading, writing and ‘rithmetic but they are similar and they are just as fundamental. I can tell you that without the three R’s, you will never maximize collections of your notes. The three R’s of buy here pay here collections are Read, Review and Respond. As an owner, collection manager, supervisor or team leader you must adhere to these three rules if you want a successful collection effort.

The first of the three R’s is Read. This is so fundamental is needs no explanation but for some reason, this is precisely where collections break down the most frequently. The importance of this “R” is that you must read your collectors notes and do so on a daily basis. Many owners and collection supervisors don’t even do this fundamental task. I don’t know why they don’t but my guess is there is always some other task that seems more important. I doubt any task is more important than reading collection notes. Why? It is our first indication of the amount of collection work being done and quality of that work. If you measure collection activity and production by the appearance that your collectors are on the phone or that the call they are making is to an actual customer, you may be wrong.

Every time I conduct a review of collection notes on an onsite consultation, I am disheartened, not only by the lack of collection work being done but the fact that most supervisors, managers and owners don’t know how much work is being done because they don’t even take step one: Read The Notes. If you do not fall in this category; good for you. If you only think you don’t fall into this category, check some notes. The rest of you are at the mercy of your collectors and customers instead of in control. That is a scary thought. I do not mean to imply that all collectors do not work if gone unchecked but there must be accountability and more importantly constant training so that collectors collect better, and better collections means more cash, and more cash means more profits.

The second R is Review. The review “R” is that of analysis. It is one thing to read notes but it is quite another to read the notes and analyze what is happening with an account. This is the first step in improving collections from a productivity standpoint and also from a results standpoint. Owners, supervisors, managers and team leaders need to have the skill to analyze the work being done in collections. You need to see where there is room for improvement in collection calls including additional steps that need to be taken, better solutions or creating a sense of urgency with a customer. Reviews allow us to find weaknesses in the collector skills and their weakness in their style. This is the only way to improve a collector’s results. They must first know what they are doing wrong or poorly before they can improve and secondly they need ideas on how to handle situations properly. If your modus operandi is to just scream, yell and threaten, my advice is to keep a “collector wanted” ad on craigslist; you’re going to need it.

The third R is Respond. In order to complete the process the third R is most critical. You can read all the notes you want and you can review them as well but if you don’t respond nothing changes. The response can be as simple as making your own notes in the collection note screen. This should be used for immediate feedback and suggestions on specific accounts. This process serves two purposes. The first is to let the collector know they will be held accountable for the amount of work done and secondly, that poorly worked accounts are not acceptable. The second purpose, and more important purpose, is to teach the collector how to better handle objections and excuses as well as to teach them how to offer solutions. This training will help the collector better handle similar situations in the future.

When I conduct field audits, the first thing I look for is supervisor, manager or owners notes. To date, only a handful of collection supervisors, managers and team leaders I’ve reviewed actually respond in this manner. The reason it is as important to me as an owner is that these notes are the only true measurement of an ongoing and consistent collection training and review process. The famous last words of any quality collection manager are this: If there are no notes, it did not happen. That is a collection rule, not a collection guideline.

In conclusion, I challenge each reader of this article to do one thing. Put down this magazine, go to a computer and randomly pull up ten or fifteen past due accounts and read notes, review both the steps taken by the collector and the advice given by any supervisor and then respond either on specific accounts by making some collection notes or by calling in the collection team and reviewing the accounts in a group situation. If you are unhappy with your findings, do not get angry but look at this as an opportunity to teach and train.

Chuck Bonanno is a partner of the firm, Leedom and Associates, LLC. He is an executive Conference Moderator of Buy Here-Pay Here and Automotive Finance 20 Groups. He is a nationally recognized speaker, author, industry trainer and consultant.

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