Credit Management meets computer automation
A necessary balancing act. A risky business
Shortly after Easter, a newly installed computer system sent out red letters to over 3,000 Derby City residents who had already paid their Council Tax. There were howls of outrage, and an obligatory computer error excuse from the Council. Matters were then compounded as angry residents tried contacting the Council to put the matter right - and found themselves blocked by an automated call system.
Michael Aubrey, from Derby, was threatened with a demand for immediate payment of over £1300 if he did not sort matters out within a week. However, he said: "I rang all the numbers on the form and all you get through to is an automated payment line, where you can't talk to anybody and say I've already paid."
This is the downside of computer automation in one of the most sensitive areas of commercial interaction: credit management. Unless we pay for everything in cash or up-front, it is an issue that will affect us all at some point in our lives.
Like so much else in business, credit management is a balancing act. At one extreme - mostly in the retail sector - are businesses that do not give credit at all. They minimise the possibility of incurring bad debt - but in so doing, they probably fail to maximise store turnover, losing purchases from those who do not have the money to pay right away.
At the other end are those business that exist solely on credit: They provide goods and services before any monies are received. And therefore their success is wholly dependent on their ability to manage the associated credit risk. Many businesses, of course, fall between these two extremes.
According to Neil Monroe, External Affairs Director at UK Credit Referencing, Equifax, best practice relies on implementing a traditional view of the consumer lifecycle. That is, businesses need to balance risk and profitability, while recognising there is no absolutely right answer: What works for one may not work for another.
Best practice also includes segmenting prospects before they become customers - and then managing customers on an individual (or segment) basis throughout their time with an organisation. Thus, some thought needs to be given as to whether an individual is going to be a "good customer" at the point of recruitment - not six months after they have become a customer and owe hundreds of pounds that they are unlikely ever to repay.
The level of credit granted should reflect the same factors, as should the approach to individuals whose accounts have started to pass into delinquency. Some of those who are presently not paying can pay, but won't: Some simply can't, but with a little help and careful management could revert to being model customers in future.
Businesses need to recruit "goods" - individuals who spend a lot and pay on time - and reject "bads." Ultimate success or failure depends on how they manage those who sit between these two extremes - the "greys" - who may spend a lot but be highly risky in terms of payment or pay mostly on time, but spend very little, so ultimately wiping out any profit margin through admin costs.
A major issue that el Reg has encountered is that businesses do not always succeed in applying such an integrated approach. The Marketing Department see their task as bringing in new customers, more orders, no matter what: The Credit Section see their function as safeguarding the bottom line. In essence, they are assessing customers according to two different sets of criteria - and in the worst cases, creating serious systemic problems for their organisation.
In one hi-tech company, this problem was so acute that canny customers eventually worked out that the quickest way to obtain 6 months free subscription was to default on a payment - because marketing would do anything in their power to prevent the customer count from reducing.
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if i will ever allow "smart" counters or "tagged" machines in my house w/o proper HF filtering to isolate their chitterchatter i shall be eControlled and would prefer just to get the damn cable directly in my brain - which will most likely finally may voting superfluous - they can then tell me whom to vote for anyways :/
"it seems like the one I was aware of is/was far from unique."
I've heard of a few others thru' the grapevine, but managing my Mom's AOL account is the only example that I have had direct experience with. For some daft reason, Marketing departments of the world seem to think that the Internet works the same as conventional media when it comes to eyeballs/ears & advertising ... i.e. more always equals better. Which isn't the case.
Pay Utilities quarterly???
You LUCKY chaps, here in Floriduh; we have the unpleasant chore of having to pay most utilities MONTHLY!!!!
Many of them repeatedly try to get you to permit direct debit for the bill. That is one thing I will never agree to. The reason why follows; I would rather make the payment from my bank's website, then let those scummy bastards touch my bank account. The way payments are handled differs between direct debit, and on line payment (i.e. "who" institutes the money transfer).
I knew someone who was the CFO for a small company, and allowed their property liability insurance company to direct debit the insurance premium on a monthly basis. Well, those fools hit their bank account (monthly x ) 12 times in the first month alone. That should have indicated that the entire YEAR was paid in full!
The second month, they hit it again for 11 times. The insurance company got a VERY nasty phone call about it, and after a week's delay, refunded the money They also promised that it would not happen again.
Well guess what, the third month, they got hit for 10 times. This time, no phone call; just a complaint to the insurance commissioner's office. When the policy came up for renewal, they switched companies faster that you can run from a swarm of locusts.