RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT

Transcription

1 RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT A comprehensive approach to innovating and streamlining the collection process incorporates performance data and program planning. Joseph Milack, Accenture OVERVIEW Faced with unprecedented fiscal challenges, governments today are compelled to deliver services at minimum costs. One approach to cost management is to reduce spending. However, an often-overlooked approach is to increase revenue generation through the implementation of more efficient collection processes. Through eperience in working with revenue agencies around the world, Accenture has analyzed the entire collection process and identified key elements that drive effective receivables management and. From the issuance of bills to telephone and field contact to drive enforcement, Accenture has developed a comprehensive approach to enhance the collection process by balancing customer service and collection enforcement initiatives. This document outlines a comprehensive approach to innovating and streamlining the entire collection process by incorporating performance data and program planning. The availability of new data sources and analytic and decision support tools, combined with the capability to automate workflow and compile etensive performance data, provides an opportunity to reinvent the collection process in order to realize increased revenue. RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT FOR REVENUE AGENCIES Maimizing the collection of accounts receivable is a critical revenue agency function that starts with the issuance of the initial bill and progresses to more assertive enforcement action when required. It should be viewed as an interdependent process that consists of both customer service and collection enforcement. It should not be viewed solely in the contet of a single silo or collection process that relies predominantly on the strength of overt enforcement actions. The emergence of new applications, decision support tools and data sources, together with the Internet and the ability to compile more etensive performance data for planning purposes, provides the opportunity to transform the collection process and achieve maimum revenue. Accenture s eperience has shown that the collection process should: Consider collection outcomes in all program planning; Encourage and facilitate payment throughout the billing cycle; Provide multiple channels and opportunities for payment that are convenient to the customer; Provide for collection and payment during any tapayer contact; Employ progressively more assertive collection enforcement tools as accounts age; Manage workflow on the basis of collection probabilities and predictive modeling; and Use available technology to manage receivables and to support customer service and collection staff. Implementing a collection process that encompasses these characteristics necessarily requires distinguishing between two types of tapayer responses upon receipt of a bill. Contact tapayers who will contact the revenue agency to seek an eplanation of the amount due and/or inquire about payment options. Interactions with these tapayers should be viewed in the contet of customer service and the initial contact by these tapayers should be handled as such. Ignore tapayers who will not respond and will attempt to avoid or delay payment for as long as possible. Revenue agency interactions with these tapayers will need to be proactive and as such should be handled as a collection enforcement function. Interactions with tapayers, collection methods, case assignment and the progression of collection enforcement Joseph Milack is an associate partner in Accenture s Government practice. He has 35 years of public and private sector ta agency eperience, including 25 years working with the State of New York Department of Taation and Finance. His specialty is helping revenue and ta agencies worldwide achieve increased compliance revenue through innovative audit and collection approaches. 54

2 MAXIMIZING COMPLIANCE steps need to consider this distinction in order to achieve the greatest degree of customer service and the most efficient use of collection enforcement staff. Initiating aggressive, innovative collection enforcement for tapayers most likely to initiate payment upon receipt of a bill or collection letter is not only contrary to customer service objectives, it is an inefficient use of resources. On the other hand, delaying stronger collection enforcement for tapayers unlikely to respond to a bill or collection letter increases collection costs and negatively impacts collection outcomes. At the very least, it delays the receipt of payments. More importantly, the passage of time adds to the risk of the amount of accumulated liability increasing beyond the tapayer s ability to pay and makes locating the tapayer more difficult. The management of receivables and collection enforcement actions requires an innovative approach that encourages and facilitates voluntary payment upon notification of a ta liability and quickly assigns receivables to the collection process or stage most likely to result in payment at the least cost. Accenture has categorized the components of this approach as follows: Comprehensive and educational billing practices; Multiple, convenient payment channels and options; and Timely collection enforcement actions. COMPREHENSIVE AND INFORMATIVE BILLING PRACTICES The collection process begins with creating the bill and is primarily a customer service function. Billing tet and accompanying correspondence must include an understandable and complete eplanation of the reasons for the bill as well as the Make sure instructions for the resolution and/or payment cover all options, e.g., full payment, installment payment plans and appeal. This should include specific instructions on how to contact the revenue agency for each option. Cross-reference other available communication channels within the bill tet and encourage tapayers to access them. For instance, the agency website is ideal for providing epanded eplanations and instructions based upon bill type, the compliance program from which the bill originated and the full range of payment options. Conduct tapayer outreach programs and/or conduct surveys to understand how billing notices can be improved and to determine what additional information can be provided to help customers understand billing reasons and payment options. In addition to providing comprehensive billing tet, other successful organizations take the following steps to enhance the effectiveness of bills and facilitate timely payment: Provide training so that knowledgeable, accessible customer service representatives can, without long delays, answer most billing questions and arrange payment terms; and Implement a process to gather and compile feedback about inbound contacts. This information provides the means to continually improve bill tet, correspondence and the compliance programs from which the bills originate. PAYMENT CHANNELS AND OPTIONS A complete eplanation of why the additional ta is due and clear instructions about payment options are the first steps The objective is to facilitate convenient one-stop service that handles voluntary tapayer payment efforts as customer service, not collection enforcement. actions necessary for resolving disputed items and paying the amount due. Payment is contingent upon the tapayer understanding why the amount is due and how it may be paid. While there are practical limitations to the amount of tet and the number of documents that may be included in a mailing, finding the right balance of content is critical to good customer service and to encouraging payment of the amount due. Accenture has worked with clients to successfully implement the following key success factors: Communicate clearly and concisely. Avoid the use of jargon and uncommon terminology. Provide informative, logical and complete eplanations. Avoid omitting steps or factors construed as obvious within the revenue agency. toward achieving maimum. Providing ease and convenience of payment, as well as options that accommodate a tapayer s financial condition, is the net step. Current technologies provide a wide variety of payment channels and options. All should be eploited to the fullest etent possible, especially those that are interactive and provide a means of self-service. In addition, all appropriate billing contacts with a tapayer should include an attempt to facilitate collection and arrange for payment terms without referral to collection staff. The objective is to facilitate convenient one-stop service that handles voluntary tapayer payment efforts as customer service, not collection enforcement. This will not only assist the tapayer, but will also result in more efficient and effective 55

3 RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT use of collection staff. Resolving collection contacts in a single transaction, regardless of organization, eliminates the redundant effort resulting from policies and procedures that require involvement of telephone and field collectors whenever a tapayer is attempting to remit a payment or establish a payment agreement. Key focus areas include: Types of Payment Check, money order, etc.; Credit cards, debit cards; and Electronic funds transfer. Payment Channels Customer service counter; Telephone contact; Correspondence, mail; and Self-service (including entering into payment agreements) Internet Interactive voice response. Policy and Procedures Etend call center hours; Empower customer service representatives to resolve collection issues, including setting up payment agreements; Require electronic funds transfer payments for all installment payment agreements eceeding dollar or time thresholds; Include financial account and other relevant information in audit documentation; Discuss collection options at conclusions of audits that involve direct contact with tapayers; and Authorize auditors to establish payment arrangements at the conclusion of an audit. Accenture s eperience in working with revenue and ta organizations has shown that the achievement of this level of payment fleibility must be viewed as an enterprisewide process that crosses traditional organizational boundaries. It requires coordination and support of the entire organization. All opportunities to obtain and encourage payment must be identified and eploited. Roles. Review and structure the roles and duties of customer service representatives and telephone collectors to resolve most customer inquiries in a single telephone contact without transfer. Training. Train customer service representatives sufficiently and provide access to all necessary account information. They should also be able to eplain noncomple billing reasons, provide payment instructions and arrange installment payment agreements based upon established rules. Policy and procedures. Develop clear and definitive policy and procedures for payment terms, such as the conditions for etending the tapayer additional time to pay and entering into installment payment agreements. Fleibility and balance. Define sound criteria for interactive channels to be used for entering into installment payment plans. These criteria need to strike a balance between the efficiency of providing self-service installment agreements and encouraging tapayers to elect such agreements as an alternative to paying in one lump sum. Audit practices. Establish audit procedures that include the requirement for discussion and resolution of collection issues at the audit closing conference. An etensive customer service approach to collecting unpaid taes will not eliminate the need to enforce collection through more aggressive and effective actions. There will be a segment of tapayers who will attempt to delay or avoid payment regardless of the degree of customer service and range of payment options made available to them. Collection enforcement actions should be focused on the accounts receivable associated with those tapayers, not on those of tapayers who will remit payment without being confronted with stronger collection approaches. Usually, the inventory of accounts that will require some form of collection enforcement actions eceeds the capacity of the resources available to the revenue and ta agency. Thus, achieving and sustaining optimum collection of accounts receivable depends on which accounts are worked and how they are worked. The assignment of accounts needs to be based on the probable collection outcomes in terms of both whether and how the account can be successfully satisfied. In addition, telephone and field collectors need to be enabled with efficient processes and tools. Rule-Based Assignment of Accounts Historically, the collection process starts with collection letters and progresses to telephone contact or field contact. Variations of this standard collection approach and the use of judgments, liens, levies and seizures are generally based upon the following: Dollar value of the account; Type of ta; Type of caseworker (telephone vs. field collector); and Volume of accounts and available resources. This approach does not result in the efficient use of collection enforcement resources because there is very limited use of probable collection outcomes built into account assignment and workflow. Thus, many accounts are assigned to collection methods that will have no effect on the collection outcome, which results in an ineffective use of collection staff. For instance, not all accounts assigned to telephone collection are collectible via a telephone contact. Some may require a field visit and others may not be collectible without the use of a lien or levy. Assigning these accounts to telephone collectors without regard to the probability of a successful outcome is an unproductive use of a telephone collector s time, reduces the total number of successful telephone contacts and delays the collection of those accounts. The result is fewer revenue collec- 56

4 MAXIMIZING COMPLIANCE tions than are achievable based on available resources and account inventory. Introducing assignment rules based on probable collection outcomes removes the inefficiency that results from assigning accounts to collection methods that will not result in payment. It maimizes the effectiveness of each collection process and accelerates the movement of accounts to the most appropriate collection stage. Developing reliable, comprehensive assignment rules requires in-depth analysis of accounts receivable and collection history, including such factors as ta type, entity, assessment reason, financial sources, etc. This analysis includes identifying correlations between relevant factors and historical payment patterns and thus requires analytical tools and decision support applications. There are a number of analytical and decision support tools widely used in the private sector, especially financial services, that have proven very successful. The tools are used to rate credit applications, identify risky accounts and prioritize accounts requiring collection enforcement. These analytic and decision support tools are transferable to the collection of unpaid taes. These tools compute probable collection outcomes and determine the assignment rules based on those outcomes. The scoring that drives the probability and decision support is based on available financial data and history, that is, ta type, entity type, amount due, prior collection history, etc. Figure 1 illustrates these probabilities in very simple terms. Consider the insight that the following probabilities, generated by using the tools mentioned above, would provide for the assignment of unpaid sales ta accounts. These probabilities suggest moving accounts to more aggressive collection stages sooner. Potential assignment rules, driven by decision support tools, for accounts with these probabilities would look like this: Cease the use of correspondence after statutory notification requirements are met; Bypass assignment to the telephone unit; Use available lien and levy sources as soon as statutorily permitted; and Assign remaining accounts to field collectors. If these rules were followed, they would more than likely: Eliminate unnecessary billing correspondence. Reduce the number of accounts assigned to telephone and enable telephone collectors to handle more accounts that are more collectible by telephone. This would increase total telephone. Epedite the assignment of accounts to field collection, which would reduce enforcement delays and increase field collection rates. The efficiency inherent in scoring all receivables to identify which collection approaches to use and which to avoid is apparent. When balanced with available staff and other resources, effective scoring results in assignment and staff utilization strategies that maimize revenue. Collection action Billing correspondence Telephone contact Field visit Lien/levy Asset seizure Successful collection likely Figure 1 Probabilities for Assignment of Unpaid Sales Ta Accounts Work Methods and Procedures Rule-based assignment of accounts is the starting point for collection enforcement. It provides a means of assigning and allocating account inventory to achieve results that maimize revenue. However, to realize the maimum benefit of rule-based account assignment, the collection enforcement tools, process and policies must take full advantage of automation, statutory authority and available data sources. The cumulative impact of incremental improvements to collection work methods and functions cannot be overstated. While there is a broad range of collection enforcement functions, the following are the primary areas that are essential to the overall efficiency and effectiveness: Payments and account adjustments need to be processed in a timely manner and accurately. Systems and processes should be designed to minimize difficulties and delays in applying and transferring payments, editing payment transactions and adjusting account balances and status. Cumbersome, manual processes consume staff time and delay updating account balances. This is critical to good customers and meaningful one stop customer service. Account balances and status should be updated on a real-time basis. The efficiency of collectors is dependent upon current account information. This is also essential to customer service and the ability to provide one-stop service. Returned mail processing and skip tracing need to be priorities throughout the collection processes. Reliable data sources should be used to obtain and maintain current tapayer addresses. Although it is usually overlooked, the impact of returned mail is cumulative, impacting the efficiency of the entire collection process and resulting in significant amounts of lost revenue. Failure to effectively process returned mail and obtain more current addresses is estimated to result in lost compliance revenue in the amount of 7 to 12 percent. The case management function should automatically move accounts through the collection process based on the predetermined rules and time intervals. Successful collection unlikely 57

5 RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT Accounts for which tapayers have failed to meet agreedupon payment terms within agreed-upon time periods should be automatically moved to the net collection step without requiring tapayer contact. Payment plans should be system-monitored and defaults identified and acted upon within 15 days. Tapayers who default should be contacted immediately by telephone, correspondence or , and collection enforcement either should be resumed if the payment the best results from the analytics and decision support tools, as well as staff and resource planning. The greater the degree of detail (ta type, assessment type, entity type, etc.) for each category of data, the more precise the collection strategies and analytics can be. These data will also provide important feedback to the programs from which the liability was generated. The following data should be compiled and maintained: The number of bills generated by the operating organizations, i.e., audit, discovery and returns processing; An etensive customer service approach to collecting unpaid taes will not eliminate the need to enforce collection through more aggressive and effective actions. plan is not current within 30 days or should be renegotiated based upon appropriate changes in the tapayer s financial condition. Financial source information should be made available online to facilitate the lien and levy processes, and the lien and levy processes should be fully automated. Collectors should have the capability to access financial source data for the accounts for which they are assigned and issue liens or levies via automated system commands. Closed, unpaid accounts that are within the statute should be automatically reactivated based on changes in the tapayer s ability to pay, more current addresses and the identification of new financial sources. Closed, unpaid accounts should be identified by reason codes based on the reason(s) the collection payment was not obtained, such as unable to pay, unable to locate, etc. The process and rules for reactivation should be dependent upon the reason for which the account was closed without payment. MANAGING COLLECTION OPERATIONS Managing the collection operations to take full advantage of rule-based account assignment and available resources requires a significant planning effort. It also requires the ongoing analysis of the inventory of accounts receivable and collection history. These efforts depend on four planning components: Performance data and collection history; Accounts receivable inventory data; Projections of epected new accounts receivable; and Staff utilization planning. Payment rates for all bills and collection letter mailings (providing a means to evaluate the effectiveness of each mailing and drive decisions on the number and types of mailings to be employed in the collection process); and The outcomes of telephone collection efforts, including: The number of accounts handled per telephone collector ; The number, type and value of accounts that result in payment and payment plans; The number, type, value and outcome of accounts for which liens or levies were issued; and The number, value and reasons for which accounts were closed without full payment. The outcomes of field collection efforts, including: The number of accounts handled per field collector ; The number, type and value of accounts that result in payment and payment plans; The number, type, value and outcome of accounts for which liens or levies were issued as a result of a field contact; and The number, value of and reasons for which accounts were closed without full payment. The use of telephone and field collector time, including the amount of time spent on: Performance of direct collection tasks; Supervision; Administrative and clerical tasks; Training; Leave; and Other tasks, i.e., special projects. Performance Data and Collection History Compiling and maintaining key performance data and collection history are critical. This information is necessary for achieving Accounts Receivable Inventory Data Detailed information about the type, value and age of accounts receivable is critical to management planning and to balancing 58

6 MAXIMIZING COMPLIANCE workloads with staff availability. It provides a means to set tolerances and change account assignments when the inventory of accounts eceeds the capacity of available collection staff. Understanding what is in the inventory and knowing the probable collection outcomes, based on the collection approach employed, will facilitate plans to achieve the greatest amount of revenue collection with the type and number of collection staff available. The following inventory data should be compiled and maintained: Number, type, value and age of accounts receivable for both active and closed, unpaid accounts; The number, type, value and age of assigned accounts by organization unit, collection stage and collector; and The number, type, value and age of open, unassigned accounts categorized by the assignment decision resulting from the analytics and decision support process. Projections of Epected New Accounts Receivable A complete planning process requires estimates of epected workload, which includes both current inventory and the epected number of new accounts that will be created during the planning period. Thus, effort is required to develop estimates of the new accounts that will make their way from billing, through the analytics and decision support process, and into the inventory of accounts requiring enforcement action. This information is necessary to adequately plan for the use of staff, develop assignment strategies and set tolerances. Accenture s eperience with revenue and ta agencies has shown that developing these estimates requires participation of the operating organizations that generate the bills (e.g., audit, discovery and returns processing) and maintaining the statistics on the historical number of bills generated. The following is a simple illustration of this projection and eercise: Audit managers provide projections of the number of bills to be issued by each of their programs; Collection managers reduce the audit projections by the historical billing collection rates to identify the volume of bills that will eventually make their way into eisting or new accounts; and The projection of new accounts is categorized by epected assignment outcomes based upon historical eperience. These projections, together with current account inventory counts, will provide collection managers with estimates of epected workloads during the planning period. The workload estimates will be compared to historical account work rates to develop staff utilization plans, assignment strategies and tolerances for determining which accounts will be worked. Staff Utilization Planning Unless available staffing is sufficient to handle all of the accounts in the way in which the analytics and decision support applications suggest, making decisions on how to assign accounts in light of epected account workloads is critical to maimizing revenue. Complete data about current account inventory, epected new account workloads, historical collection rates and historical outcomes form the basis for planning how collection staff and other resources will be deployed. It provides the means to develop staffing plans and account assignment strategies that balance epected workloads and staff assigned to the various collection operations. This planning and the decisions necessary to complete the process should be performed and completed in advance of the planning period. The planning period should coincide with the fiscal year so that it can be aligned with the annual budget process. The plan should be developed prior to the start of the fiscal year with sufficient time to reassign staff and reroute accounts in accordance with the objectives of the plan. The planning process begins with a staff time analysis. Each collection unit should provide estimates of the number and type of staff to be employed in the planning period and how their time will be used (see Figure 2). This process requires: Decisions about upcoming hiring and estimates of epected resignations and terminations; and Historical data on the use of staff time. Direct collection Field collectors Figure 2 Staffing Estimates Telephone collectors Clerical staff Total days 1,300 2, ,450 Leave Training Customer service Special projects Other ,025 1,225 Total days available 2,400 3,600 1,200 7,200 Figure 2 above illustrates the outcome of this analysis. It assumes that, after subtracting weekends and holidays, there are 240 days per year available for work assignments for each full-time equivalent. It is based on 10 field collectors, 15 telephone collectors and five clerical staff. This analysis provides a single view of how staff will be used, based on eperience. It also provides the insight into staff assignments that can be used to guide decisions so that a large portion of collector time is attributable to direct collection activities. Work Rates and Outcomes The work rates and outcomes are based on past performance. They require calculations based on time, completed cases and dollars collected based on historical eperience. Figure 3 is an aggregate of all field and telephone collection work types. 59

7 RECEIVABLES MANAGEMENT AND COLLECTION ENFORCEMENT Field collector Telephone collector Figure 3 Collection Work Types Accounts completed 3 15 Dollars collected $5,000 $8,000 Epected inventory of accounts During the budget process, the revenue and ta agency has credible data to define the revenue impact of reductions and/or increases in staff. Collection approaches and workflow can be changed to handle the ecess of available accounts over what collectors can complete. For instance, accounts for tapayers with a history of nonpayment can be routed directly to the levy process without assignment to collectors. Field Telephone Figure 4 Probable Assignment Recommendation However, it is likely that there will be work rates and outcomes for several distinct categories of account types. Epected Account Workloads Based on the input about the epected volumes of new accounts and historical eperience about the probable assignment recommendations resulting from the analytic and decision support applications, Figure 4 shows estimates of workload assignments to the field and telephone collection units that can be computed. Projection of Staff Utilization and Revenue Collections The staff utilization plan is the combination and projection of the performance data and prior calculations. It reflects the planned use of collectors and the epected revenue based on the use of available staff. The results in Figure 5, together with the projections of collector use of time, revenue and epected account workloads, are valuable resources for program managers. During the planning process, program objectives and staffing decisions can be re-evaluated to effectuate different outcomes. Collector time on other than direct collection activities can be reviewed and modified to increase days epended on direct collection activities, which would increase total revenue. For instance, in Figures 2 and 5, 700 collector days are planned for special projects and other activities. Reducing that by 50 percent would result in completing 2,850 additional accounts and collecting additional revenue of $2.2 million (see Figure 6). Program Field Telephone $5,000 $35,000 Available accounts Figure 5 Collection Staff Utilization Plan Projections The final staff utilization plan should include a brief narrative of the program objectives and assumptions. This serves two purposes. First, it forces program managers to set aside time to think through and commit to a plan of action to guide their decisions during the year. Second, it provides a record of epectations to which actual outcomes can be compared. This will alert program managers to unanticipated events or changes in account volumes that require changes to the staff utilization plan. Management reporting during the year should include reports that compare projections to actual outcomes and identify differences. When the differences are significant, the plan assumptions should be reviewed and the plan modified if necessary. Conclusion The collection process can be greatly enhanced through a comprehensive approach that balances customer service and collection enforcement initiatives and that employs comprehensive use of performance data and program planning. The availability of new data sources and analytic and decision support tools, as well as the capability to automate workflow and compile etensive performance data, provides an opportunity to reinvent the collection process. Accenture can partner with your organization to transform the collection process, resulting in significant increases in revenue. Days available Completed Total accounts completed Collected Total revenue collected 5,000 1, ,900 $5,000 $6,500,000 35,000 2, ,250 $8,000 $17,200,000 Total 40,000 3,450 36,150 $13,000 $23,700,000 Program Field Telephone Available accounts Days available Completed 5,000 1, ,500 $5,000 $7,500,000 35,000 2, ,500 $8,000 $18,400,000 Total 40,000 3,800 39,000 $13,000 $25,900,000 Figure 6 Alternative Collection Staff Utilization Projections Total accounts completed Collected Total revenue collected 60