The importance of empathy when collecting late payments

Despite the ONS (Office for National Statistics) reporting that the UK unemployment rate fell to just 4.1% — a near pre-pandemic figure — inflation continues to take its toll on people’s wages, which have largely remained stagnant in the recent decade.

With the cost of living and energy price caps increasing rapidly, a third of Britons are now concerned that they won’t be able to afford their energy bills in 2022, which are set to reach up to £2,000 annually.

As a result, more companies will likely notice a higher volume of bills going unpaid, even amongst customers who once settled their balances on time every month. Now, more than ever, it’s crucial for businesses to take an empathetic approach to collections. Organisations that fail to do so could suffer reputational damage and may be unable to survive post-pandemic.

Whilst you have your finances and cash flow to consider, there’s a lot to be said about a good reputation. Organisations with better reputations will retain a higher number of customers in the long run, helping to create stability in the long term.

Therefore, in this article, we’ll explore the challenges people are facing financially over the coming year. We’ll also share the importance of empathy as part of a collections strategy and explain why outsourcing may be the ideal solution for businesses that are struggling to collect late payments.

Why will more people be unable to pay bills in the coming year?

Although redundancies, furlough and business closures created economic turbulence at the beginning of the pandemic, unemployment rates are no longer the largest cause for concern.

As the pandemic has persisted longer than expected and other unexpected challenges have appeared, households across the UK are finding themselves in strenuous situations that impact their finances. 

Let’s look at the top four causes of financial hardship that your customers may be affected by in the year ahead:

1. The energy price cap rise in April

The energy price cap rise in April 2022 is expected to plunge approximately one million UK households with children into poverty. In addition to making energy a luxury that growing numbers of people will be unable to afford, the cap increase adds a further disadvantage to those who were already living on the breadline pre-COVID.

Those on the lowest incomes and in less energy-efficient homes may not just experience financial troubles but also significantly worsening living conditions and deteriorating health, all of which contribute to a decline in physical and mental wellbeing and, thus, an inability to settle debts.

2. The increasing cost of living

The cost of living is climbing at its quickest pace in nearly three decades, making food, energy, furniture and clothes unaffordable for many. Adding to the escalating costs, the new government measures — including the social care levy on national insurance — are causing people to face difficult decisions, such as choosing between feeding their families or turning the heating on during the bitter winter months.

Consequently, the Resolution Foundation has said that 2022 will be the ‘year of the squeeze‘ as people across the UK are forced to tighten their wallets and make serious sacrifices.

3. The ‘lost decade’ of wages

Shockingly, paycheques have remained relatively stagnant since the 2008 economic crisis, which the Trades Union Congress is dubbing the ‘lost decade of wages’. But, as the inflation rate reaches its highest point in ten years, money isn’t stretching as far as it once did, meaning that even people in full-time employment are struggling to keep up with payments.

Businesses are now beginning to see more first-time debtors who don’t know what to do or where to turn in times of financial hardship, so they simply stall making payments for as long as possible whilst they attempt to fix the situation.

4. The mental illness epidemic

Unfortunately, record numbers of people have sought help for mental illnesses as a result of the pandemic. New-found poverty and stressful situations — such as redundancy, business closures, health problems or family losses — have negatively impacted people’s mental health, which can make it harder to function and complete everyday tasks.

When people enter a state of ‘survival mode’, they may shut off or ignore their problems, despite best efforts to get in contact regarding late payments. Once communication begins to break down, it can be extremely difficult to help the customer, and you may need to consider using different techniques. To learn more about how to help vulnerable customers and get them to open up about their situation, read our guide.

Now you’re aware of the issues your customers may be facing, you should ensure that you have a strong collections strategy in place that equips your team with the tools they need to handle complicated problems. There are many benefits to taking a compassionate approach to collections, which we will delve into in the next section.

The benefits of taking an empathetic approach to the collections process

In today’s world, empathy is one of the best qualities a business leader can have. According to an index by The Empathy Business, the 10 most empathetic companies generated 50% more earnings than those ranking at the bottom of the list. Aside from being a lifeline for your customers, who may be experiencing a personal crisis, there are also many business benefits of making your collections process more compassionate, such as:

1. Greater earning potential

As we mentioned above, empathetic companies are some of the most profitable. But how is it possible to maintain profitability when your customers are unable to pay bills? The principle is simple: show people you care, and they will be more inclined to work with you to reach a solution. As the saying goes, “you attract more bees with honey than vinegar”.

In certain cases, you may need to point your customers in the direction of the Citizen’s Advice Bureau, give them the details of a charity that can help or even suggest an alternative payment arrangement.

Whilst such solutions may not earn you instant profit as they’re not overnight fixes, they do help your customers get back on the right track and enable them to stay on top of their bills in the future. The more vulnerable customers you help, the more you’ll find that they will be engaged in the collections process.

2. Better business reputation

We’re living in a digital age where information spreads like wildfire. In a matter of seconds, people can learn everything they need to form an opinion on your business — and they do. In fact, a staggering 78% of people say they trust online reviews as much as a recommendation from a friend or family member.

Therefore, if you receive several negative reviews from disgruntled customers, it will affect your reputation and scare off any potential clientele. If left unresolved, these damaging online critiques can severely harm your bottom line. Customers compare your company to other providers and will ultimately choose the one with the best reputation.

On the other end of the spectrum, businesses that take an empathetic approach to the collections process and listen to their customers’ concerns can expect to see positive reviews appearing online. With life feeling so uncertain for many households countrywide, people will feel more comfortable signing up to a provider who has a caring ethos and allows them to make payments in a way that works for their current situation if they get into difficulty.

3. Improved customer loyalty rate

Did you know that 73% of customers say they stay loyal to brands that have friendly agents? As the representatives of your organisation, it’s paramount to have an expert team of skilled people in your business who can handle the collections process professionally and leave customers with a good impression.

If your company isn’t being represented properly, or KPIs are overshadowing the human element of dealing with customers, you could be harming your customer loyalty rate. People who have been left with a bad taste in their mouth may simply look for a competitor and switch to them once they’ve paid off their arrears.

Customer service advisors need to be able to put themselves in other people’s shoes without allowing their personal feelings to overshadow their ability to resolve the situation. However, few individuals naturally have those skills — they require specialist training and lots of experience, which can be hard to find in today’s recruitment market.

4. Enhanced ways of thinking

Although it’s a challenge to find skilled advisors, encouraging your team to be compassionate is proven to enhance their ability to deal with difficult situations. McKinsey found that teams that take an empathetic approach to handling customers are more agile and therefore outperform their non-agile competitors 93% of the time.

As call volumes continue to surge and it becomes trickier to dedicate enough resources to complex cases, do you have the time and money to spend recruiting and training these advisors?

By the time you’ve managed to recruit enough skilled advisors, you may find that customers have become frustrated with long wait times on the phone or unsuitable solutions, which can damage your reputation. So, to ensure you have the team you need now, it could be a good idea to outsource to a collections expert, like Sigma Connected.

Sigma keeps empathy at the heart of all their customer advisor training to ensure that everyone represents your business appropriately and keeps your customers happy simultaneously. By removing the headache of sourcing the best talent, you could soon see an improved reputation, increased collections and an enhanced customer satisfaction rate — all at a lower cost than keeping your collections agents in-house.

Outsourcing to a collections expert is your best bet

Data from equity release lender, more2life, suggests that half of all advisors say it’s become harder to identify vulnerable customers due to the impact of the pandemic. A further 20% feel that the ongoing crisis has made the types of vulnerability more complex as increasing numbers of people are experiencing financial hardship for a variety of reasons.

As we continue to navigate these uncertain times, companies must ensure that they have a well-trained, empathetic team ready to take on a higher volume of calls. But, for advisors to solve problems in a way that serves both you and the customer, you cannot simply measure success with KPIs and the number of tickets resolved.

Instead, you should check that your team is offering helpful solutions and doing everything they can to maintain customer loyalty, which requires high-quality training.

One of the best ways of ensuring that you have an adept team that can scale to meet customer demands is by outsourcing to a service centre solutions provider. Since these providers are dedicated solely to customer interactions, they have the skilled resources you need to keep your business’ reputation intact. Better still, by taking the stress of managing the collections process away, you’ll free up some time to focus on other business-critical activities.

Give your customers the experience they deserve with Sigma Connected

At Sigma Connected, we believe that every customer should be treated with respect, regardless of their situation.

We understand that every company’s needs are different and will vary over time as your business and customers’ needs change. As a result, we adapt quickly and work flexibly to meet your needs.

Want to learn more about our services? Contact us below.