Building an internal business case for third-party recoveries

If you understand the need for third-party recoveries but have internal stakeholders to bring on the journey, this is for you.

For first-time outsourcers, constructing a robust business case can be a hefty task. Especially when your number one priority is your customer relationships, third-party collections require extra consideration.

Let’s look at how our subscription-based clients develop an effective business case to secure internal buy-in.

Step 1: Begin by evaluating your need

First place to start is your why.

The dominant driver for businesses to outsource collections is the need to reduce open debt write-offs. From a business case perspective, it’s important to get into the detail:

• How much is your write-off portfolio? How has this changed over the last few years?
• What proportion of failed payments are being written-off? How much is recovered through internal dunning processes?

It’s essential to work closely with your Finance and Treasury teams here to get an accurate picture.

Beyond revenue recovery, consider other aspects in your needs analysis. This includes your internal teams - particularly the current impact of outstanding payments on your Customer Service, Product, Payments or Finance team. These roles are often on the frontline when it comes to internal recovery efforts, managing customer communications, payment follow ups and more. Gauge their sentiment towards a collections partner, as increasing internal pressure is a hallmark sign that your business is ready to outsource.

Another useful factor to look at is your existing customer lifetime value and customer churn. Contrary to popular belief, collections can work to extend your customer lifetime value - with the right partner. If your customers who fall behind receive a positive collections experience, they’re far more likely to use your product later down the line, once they’re back on track. 88% of businesses say that repeat customers contribute to 25-75% of their annual revenue. With these numbers, it’s not a factor to overlook.

Step 2: Outline the key benefits of outsourcing

Let’s start with the obvious: revenue impact. Any return on open debt write-offs is a win for all stakeholders, but how can you go the extra mile? Provide recovery return estimates with target liquidation rates, and set a benchmark for success. This can vary depending on your customer base and market.

The tipping point towards engaging an agency for most subscription-based business is the control your brand retains over customer experience. The right collections partner will see themselves as an extension of your brand, protecting your reputation and customer relationships. This attitude should flow down from their values into their engagement strategy, with a friendly Customer Experience team to match.

An understated benefit of outsourcing collections is the cost saving. Managing recoveries in-house requires additional headcount, software and expertise (at the least). With a partner, you can minimise operating costs and maximise your return - simultaneously. Agency pricing structure can differ, but the standard industry model is commission-only. InDebted takes this approach, and only receives a portion of what’s collected.

For your stretched internal teams, intelligent third-party agencies can take the bulk of their spilling workload. With simple upload processes, accounts can be transferred in real-time by non-technical roles - also protecting your Engineering teams from being inundated with new tasks. A full service agency will also handle any customer enquiries, preserving your Customer Service team. All in all, the right partner can make your team more efficient, productive, and focussed on core business.

Step 3: Finding the right provider

To really get the ball rolling, identify your ideal collections partner. To get the most out of a partnership for your business and customers, look for an agency that:

• Prioritises customer relationships: Aside from the usual messaging on their website, you should feel that your customers are truly in safe hands. Ask any potential agencies for an interactive product tour, or real customer reviews to see what customers experience.
• Builds-in compliance: Experienced agencies should have a thorough, in-depth understanding of the compliance requirements in their respective regions. Find out how these are built-in to their processes and what safeguards are in place, to tick the boxes for your legal team.
• ​​Delivers high performance for similar businesses: The proof is always in the pudding. Question agencies on their performance with similar accounts, to understand their market expertise and experience.
• Leverages insights with advanced technology: Your relationships with a collections partner isn’t boundaried to ‘amounts collected’. Sophisticated agencies should empower your internal teams with meaningful insights into your customers and how they engage.

Beyond immediate account referral, it’s also important to consider your bigger picture. For example, do you have more products on the horizon, or are you planning to step into a new market? If your customer base is growing, your stakeholders will want to know whether a new collections partner can handle a sudden influx of new accounts and scale with you.

Step 4: Bringing it altogether

Getting stakeholder buy-in for third-party recoveries requires all the above, packaged in a digestible format. To make it more compelling, your potential collections partner can work with you and provide data-backed insights, performance metrics and more. They should also be willing to meet with your leadership teams, to address any potential concerns and outline their collections processes.

A strong internal case for collections will go beyond just revenue recovery—demonstrate how outsourcing enhances customer relationships and boosts operations, without impacting the purse strings. As you dive in, remember that the right partner will improve your team’s efficiency and streamline your workflow, all while protecting your brand.

Ready to make your case?