Collections - The Gorilla in the Room

The tax season has passed, and the summer of 2025 begins. I am not sure what to expect for the next several months. Despite what anybody may think to the contrary…… the election went the way it needed to. The economy and the outlook of people everywhere is a sigh of relief and like a huge weight has been lifted, even with the deportation and tariff fears. Things seem calmer than they have in a while. No COVID, interest rates and prices are slowly coming down and attitudes are going up.

As usual, I start the year being in dozens of dealerships doing some type of training or consulting (either onsite or online) and watching the changes take place. I have been working with several dealers for the past several months on collections and sales. Most of my time these days is helping coach collection teams and managers.

After 30 plus years of day-to-day BHPH operations I have about figured out that team building and training is the most important part of our success. Whether your operation is you and your significant other or if you have 100 employees, y’all have to communicate with each other, support each other’s tasks and remember that there isn’t a car or customer more important than the people you “go into battle” with. Yes, it is a bit like battle. Your team against all the customers. Y’all are focusing on dozens, hundreds or thousands of accounts trying to keep the balls in the air and many of the customers are individually trying to NOT pay. For 30 years I have said “there is a handbook out there on how to avoid paying us but I cannot seem to find a copy”.

I have been working with several collection operations, large and small, this past year. It seems as I go in and look at reports. I see dealers starting the week at 35-40% delinquent and working all week to get near 20 to 28% delinquent. In each case I see 90 to 93% Recency on those accounts. That means that the collectors are taking a lot of partial payments. The Delinquency number and the Recency number should be about 10% apart or less by the end of the day Friday. Recency should always be in the 90’s.

The issue often is the fear of repossessions. Our customers are basically like puppies or children, they need training and boundaries. When the collections department is afraid of repossessing, they are training the customers that paying the whole payment isn’t necessary to keep their vehicle. 

You can definitely look more at collections as a cause of problems, if:

1. You have underwriting that looks at the payment vs the net income under 25%
2. You are confirming good Stability of the customer in your market area
3. You have a sound vehicle, good reconditioning and a reasonable after sale repair policy

When you have the above items having a policy of where the end of the road is for any loan (usually around 30 days delinquent) the collectors learn where to start warning customers about reaching that point. 30 days past due, the collectors can no longer help them keep the car.

What we do is start each morning with an audit of the portfolio numbers. How many accounts are delinquent and of those how many already have a promise to pay? We compare those numbers to yesterday. Then we look at the collectors’ call activity from the previous day. How many notes were made? How many promise to pays were made? When I read through a notes report, I always find some that make me ask questions. We meet as a group, and I ask each collector about 2-3 specific accounts to see what prompted the note entered and I often hear more of the story than what was written. I call that out, why are you telling me more information than I am reading? “If it isn’t in the notes it didn’t happen” has always been the mantra for collections. We go through this each day so that as a group we can discuss the thinking from different scenarios and what might have been better to say or action to take. I always have more questions I ask after each answer. I want collectors to be the same, inquisitive and trying to get the full picture.

When the meeting is over each day the team heads to their workstations and open their que but instead of trying to reach everyone on the list the collectors are working a different specific group each day.

A simple list by day is:

Monday - focus on the 1-to-3-day accounts. Don’t just call once but make multiple attempts to reach this list. It is low hanging fruit and we do not want people that were due Friday to be the 7 to 14 day delinquents later.

Tuesday – focus on the 5-to-18-day delinquent list. There will be call backs from Monday and the daily issues to handle but instead of looking at the entire list we are working in a more focused way.

Wednesday – This is “skip” day. I have them work the 20 plus accounts. Same as every day, put more time in on each account. Really spend time trying to reach each of these accounts. Depending on the operation accounts generally are disabled, out for repo, pending an insurance claim or in impound. The idea is to dedicate some time each week and focus on these accounts, can we “move the ball” today, get them off the list?

Thursday – Now we will work for the weekend. The account managers will work their 3 to 15 day delinquent accounts. This list should be short if you do not work any accounts with a promise to pay already setup. If we can get the promise to pay count over 60% versus the Friday morning delinquent account total, we will have a better Friday night number.

Friday – This is like Game Day! Positive morning meeting, generally just 15 minutes of discussing where we are with delinquent accounts that morning, what delinquent % we want by end of day and remind the team they have bonuses (hopefully) and that I want each of them to maximize the rewards available. The account managers will work 1-to-14-day delinquent accounts as they have time to call. We also look at the number of their due today accounts in the afternoon. If they have been on track all week the 1 to 14 day accounts have 60% promise to pay’s already set so the list is short. After lunch time they begin to focus on the due today accounts. How many are left on that list?

Saturday – a partial team in at 8 am for 3-4 hours to take calls and work a few accounts 1 to 2 day delinquent and broken promises from the week.

There is quite a bit of specific account coaching going on each morning. If the team knows what I am auditing then the collectors change their behavior if they are trying to improve. I always try to be a coach, not an authoritarian. In the daily battle of “customers against us” our team needs to be confident of what they can say and the actions they can take. As the coach and the department manager we need to help the team be positive, feel we have their backs and work to keep red tape from increasing the grind.