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Debt Collection Automation Software: Development from Scratch

According to an Experian study, the average American has $92,727 in consumer debt, which includes credit cards, auto loans, mortgages, personal and student loans. In 2021, about 28% of Americans had debt in collections on their credit report because they failed to pay their loans.

Whether a lender outsources the collection activity to a third party (the collection agency) or has an internal department or collection subsidiary that would handle this task, a debt collection solution will come in handy. Debt collection software, or accounts receivable management software (ARM), provides a complete suite of tools to automate debt collection and streamline management process to improve collection agency efficiency, minimize bad debt write-offs, improve debtor relations, and enable better prioritization of collection efforts.

Read on to find out what makes a good collection solution, what points to consider when choosing between custom and ready-made software, and what it takes to develop debt collection app from scratch.

automated collection systems development

What Makes a Good Debt Collection Automation Solution

In a nutshell, a good debt collection automation software performs two main functions:

  1. It automates the decision-making process by using data to enable informed decisions.
  2. It automates workflows and processes so that employees don’t have to deal with repetitive tasks, but can focus on those that require creativity and emotion.

Of course, automated debt collection solutions have many more functions, but ultimately they all boil down to what we described above: they enable automated data-driven decision making and free up employees. To better understand what that means, let’s take a look at some examples of tasks and processes that used to be performed by employees and can now be automated with a debt collection solution:

• invoicing;
• text reminders (e.g., via email or a messenger) and cross-channel follow-ups;
• customer service (e.g., chatbots and virtual assistants);
• calls (combining automated debt collection calls with Interactive Voice Response technology has proven effective); and more.

7 Points to Consider When Choosing Between a Custom Debt Collection Software and an Off-The-Shelf Solution

If you’re not sure whether your organization needs a custom debt collection solution or a ready-made one will suffice, check out these points that explain the key differences between the two options.

1. Feature set

Off-the-shelf solutions are made to meet the needs of the average business, i.e. everyone and no one at the same time. That’s why off-the-shelf software is usually stuffed with superfluous features that you’ll never need, but that you have to pay for. Conversely, it may not have the features your business needs.

Custom debt collection software has just the right feature set from the start, it is tailored to your individual needs and business goals, and you can implement new features at any time as needed.

2. Business processes

Ready-made software provides a limited number of established business processes, e.g., the system sends an email when a debtor doesn’t respond to the call. In most cases, users have to re-set these processes to make them fit the company’s workflow. The point is that such refinement will certainly take a lot of time and effort on your part. In all likelihood, a developer will also need to be brought in.

Most ready-made solutions don’t allow customization of business processes for various reasons, such as code security. If you aren’t able to reconfigure the system according to your processes, you’ll not be able to follow these processes. In contrast, the specifics of your workflow are taken into account in a custom solution, and the business processes remain configurable and customizable.

3. Tailored workflows

Most off-the-shelf solutions have a standard protocol by which debtors are distributed among employees. It may not fit your business for a variety of reasons, making reorganizing accounts receivable time-consuming and reducing effectiveness. On the other hand, when developing a custom solution, you can consider multiple parameters (e.g., an employee’s workload, the number of debtors assigned to him/her, etc.) to distribute debtors in the most efficient way.

4. Analytics tools

Off-the-shelf software rarely offers comprehensive analytics tools. In your custom automated collection system you can implement all the analytics tools you need, whether it’s analysis of employee data, statistics on closed deals displayed as graphs, or whatever else.

5. Communication strategy

Emails sent from ready-made systems often end up in spam folders leading your mailing strategy to fail. To avoid this, choose a third-party mailing service that’s proven its efficiency, and integrate it into your custom solution.

6. Advanced functionality

If you want your automated debt collection software to offer advanced features like website visitors tracking, email open rates, link clicks statistics, etc., you’d better opt for a custom solution, as off-the-shelf ones rarely offer such features. With custom software, all these and many other metrics can be monitored in real time, giving you actionable insights and highlighting weaknesses in your workflow.

7. Usability & suitability

Last but not least, the custom debt collection solution will meet all your & your employees usability requirements. This means that using such a solution is much more convenient and enjoyable than working with an off-the-shelf one and having to keep adjusting it to fit your needs.

How to Develop a Custom Debt Collection Solution

Let’s explore the process of developing custom automated collection systems.

The project begins with a discovery phase in which a business analyst thoroughly examines your business goals and the processes, how employees interact with debtors, etc. The specialist then conducts an analysis of competitors and ready-made solutions, identifies appropriate third-party services, assesses risks that may be encountered during project implementation, and prepares a detailed project estimate with a breakdown of costs and schedule. During the same discovery phase, a UI/UX specialist creates mockups of the future solution and can turn them into a clickable prototype to ensure it meets your expectations.

To make sure you’re all set to the development phase, the team creates the project documentation, which usually includes the following deliverables:

• Software Requirements Specification (SRS) – a document that describes all functional requirements with use cases, diagrams, mockups of user screens, user journey, etc.
• Software Architecture Document (SAD) – a document that describes the suggested technology and architecture of the system, third-party integrations, security, performance, reliability, and other non-functional requirements.
• Project Plan and Work Estimate – a detailed project plan with a breakdown of the total work into 8-16 hours tasks, with priorities, dependencies, and team structure.

When the requirements and design are ready, it’s time to start the development phase where developers will code your vision into a working solution. During this phase, you’ll hold regular meetings with the team. The frequency of these meetings will depend on the methodology chosen for the project implementation – for example, if the team is using the agile methodology, there will be 2-week sprints with a demonstration and a feedback collection session at the end of each sprint. Such an approach allows for early review of software releases and timely adjustments to functionality.

Once the QA engineer has performed the unit tests, automated service and UI-level testing, and manual testing, the developers debug the software, and then your solution is ready to go live. 

Web, Mobile, or Desktop Debt Collection App – Which Is Right For You?

We advise to choose a web app rather than a desktop or mobile app for the following reasons:

➤ When an update is released, there is no need to download a new version or anything else, all updates are installed automatically – you just need to refresh the app page in your browser.

➤ You don’t need to create a separate automated collection system for each operating system (macOS, Windows OS and others). A web app works the same way in all modern browsers like Safari, Google Chrome, etc.

➤ A web app is available from anywhere in the world, as is its content. With a desktop solution, access to the app is limited by access to the device on which it is installed.

➤ A web app works smoothly on any device, whether it is a PC, a laptop, a tablet or a smartphone, as it doesn’t depend on the technical characteristics of the device or its operating system. All it needs is an Internet connection.

➤ In a web application, all data is stored securely in a cloud and will not suffer if your hard drive fails.

➤ With a web application, you can open as many tabs as you need to work comfortably. The same functionality in a desktop version makes the development more expensive and significantly extends the delivery time.

➤ Although it makes sense to complement a web app with mobile, developing a mobile app only isn’t feasible when it comes to building a debt collection automation solution.

Must-Have Features of an Efficient Debt Collection Solution

Let’s explore the must-have features of efficient automated collection systems. Of course, this is not the complete list – the feature set of your custom solution will depend on your company’s individual needs and business goals, and will be tailored to them by your development team.

✔️ Debtor’s life cycle board

A board that allows staff to track the debtor’s life cycle provides a comprehensive overview of debtors and what stage of their debtor journey they’re in. There may be the following stages: Overdue Payment, Reminded, Pending Payment/Partial Payment, Enforcement Action Initiated, Paid Off, etc.

Let’s explore what happens when a borrower get the “Overdue Payment” status. Immediately after that, the borrower becomes a debtor and is assigned to an employee.

The next step to remind about the overdue payment – the assigned employee can set up an automatic reminder. If a debtor has paid the debt after the reminder, he will receive the status “Partial Payment” or “Paid Off”, depending on which part of the debt has been paid.

If the debtor receives a reminder and doesn’t pay the debt within the deadline, he will receive the status “Pending Payment”. At this stage, the assigned employee can try to call the debtor and clarify payment issues. And if the debtor doesn’t pay after that, he will receive the status “Enforcement Action Initiated”, and the employee can initiate debt enforcement.

The list of statuses must be customizable so that you can add new ones as needed and adjust other settings such as the schedule for reminders, etc.

✔️ Personal profiles of the debtors

Each debtor should be assigned a personal profile where all relevant data is available: first and last name, occupation, amount of debt, contact information, communication history including reminders sent, documents shared, etc. The employees assigned to the debtors should also be displayed in the personal profiles.

✔️ Automated distribution of debtors between employees

This feature allows to distribute new debtors in the most efficient way based on the workload, availability, schedule, etc. of the employees.

✔️ Call logs and notes

When collecting debts, you’ve to deal with a large number of calls every day. Automated debt collection calls logs and notes make it easy to keep track of communications with debtors and record the details of conversations.

✔️ Collection scoring and Key Performance Indicators (KPIs)

Collection scoring quantifies the probability of collecting the outstanding balance for accounts in collection. The collection scorecard statistically estimates the debtor’s willingness and ability to pay, helping to determine what actions should be taken to increase collections.

✔️ Access to credit reports

This feature allows you to search debtors’ credit reports for contact information or data about their account activity. Access to credit reports helps to contact debtors and assess whether they’re able to pay the amount owed.

✔️ Debt dispute tracking

This feature provides an overall view of dispute letters submitted and their details, and allows all information about each dispute to be stored in a single location for easy access by staff when needed.

✔️ Payment processing

It’s a key feature that allows to automatically generate invoices based on predefined parameters and send them to debtors. It also enables tracking of payments, notifications of money transfers and other important money-related aspects of the automated collection process. Various third-party providers can be integrated in your software for payment processing.

✔️ Communication tools

By integrating your solution with communication services, you enable employers to reach debtors and send them reminders and notifications (e.g. SMS, emails) without having to switch to another tool.

✔️ Automated reminders and follow-ups sending

Sending reminders and follow-ups is routine and boring work. That’s why it’s better if your system sends reminders and follow-ups automatically, so that employees can focus on other areas that require emotion and creativity.

✔️ Analytics tools

These make it possible to assess all required information (e.g., employee performance, accounts receivable statistics, etc.) in a digestible form of charts and graphs. This is crucial feature for executives as it provides a comprehensive overview of all processes and their efficiency, enable data-driven decision making, and allows for business objectives to be reached in a more efficient manner.

✔️ Employee calendars and schedules

This feature, integrated into your debt collection solution, ensures that your employees can work in an organized and efficient manner by finding everything they need for their work in a single place (calendar, schedule, task lists, etc.). The calendars and schedules are also evaluated when the system distributes debtors among employees.

✔️ Tasking manager

Integrating a task manager into your collection software improves employee efficiency, streamlines workflow, increases transparency of processes across the organization, and eliminates the need for additional software. With this feature, managers can assign their staff and monitor the progress of the task.

Helpful Integrations

By integrating your solution with third-party services, you can significantly reduce development costs by eliminating the need for the team to develop an entire set of features from scratch. Such functionality as payment gateway, communication and accounting tools, and more can be implemented by integrating with third-parties. Below we’ve listed the common integrations for a debt collection solution.

• Banking systems
These third parties provide information about the debtor’s payments, changes in financial indicators, the period of default, and other important data.

• SMS and automatic mailing service providers
Such integrations are helpful when it comes to communicating with debtors and setting up automatic reminders and follow-ups. These services allow communication with debtors either via SMS and email or in instant messengers such as Skype, Facebook Messenger, WhatsApp and others.

• Auto redial solution
An automatic redialing system helps handle a high volume of calls and manage calls more effectively. Such systems dial numbers for employees, but if the line is busy and the call is disconnected, the system simply redials on its own, saving employees the trouble of doing it themselves. The system keeps dialing until a real human on the other end picks up the phone.

• Accounting solutions
Such software records and processes accounting transactions and serves as an accounting information system that allows a company’s decision makers or accountants to monitor business processes and create financial reports.

As for specific services, the choice depends on several factors and varies from case to case. Need help in choosing the right third-parties for your solution? Contact our specialists – we will gladly help you choose the most suitable providers based on your needs and goals.

Cost of Debt Collection Automation Software

The final cost of your custom debt collection solution will depend heavily on the rates of the development company you hire to turn your vision into a working product. Multiply their rates by the estimated development time and you’ll get the approximate cost.

Let’s look at an example. Typically, the team needed to implement such a project consists of 1 front-end developer, 1 back-end developer, 1 project manager, 1 business analyst, 1 QA engineer, and 1 UI /UX designer.

• This team will need approximately one month to deliver the following features: registration & login, create & set up user account, and debtor lists and profiles.
• Another 3 or 4 months will be required to implement business processes and the debtor lifecycle board.
• About one to two months will be needed to implement a task manager, employee schedule and automatic reminder feature.
• Not to mention integration with third-party vendors – adding a payment gateway, auto redial solution and other services will take the team an additional month.

You can see that developing a simple and effective debt collection solution will take from 6-7 months – requirements gathering, design, testing and other important steps are included in the estimate. Note that equipping your software with advanced features will require additional time – the more complex the solution you need, the longer your team will be engaged.

Now that you know how long it will take to develop a debt collection app, you can calculate the development costs. If you have received a quote from a development company and would like to get a second opinion or just looking for a development team, drop us a line – we’ll gladly provide you with an accurate estimate.

Summary

When it comes to such delicate matters as money and debt, it’s important to strike the right balance between an efficient collection process and smooth debtor experience. In the case of automated debt collection technology can bring several benefits. For example, debt collection software allows streamline workflows, improve efficiency and relationships with debtors, and minimize bad debt write-offs. It also enables the automation of routine tasks, freeing employees up to other activities that require human touch.

If you want to automate debt collection and need any kind of help with automated collection systems, be it’s the development of a custom solution from scratch or adjusting a ready-made solution to your needs, we’ve got you covered. Reach out to our team to find out how we can help you get the most out of technologies.

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