4 Vendor Management Best Practices for Collections and Recovery

Finding, vetting, and on-boarding a new collections and recovery vendor is not easy or fast. You go through the trouble of wading through all of the potential vendors, assessing them, eliminating those with any red flags, and finally committing to onboard a vendor. So, whether you are outsourcing debt collections or adding new debt collections techology, you want to make sure those hard-won vendor relationships work well for you and last a long time.

Want strong vendor relationships? You need to have strong collections and recovery vendor mangement skills. How you manage those vendors will have a direct impact on how successful and lasting those relationships will be.

Good vendor management isn't an easy job. Creditors who are too prescriptive can damage their relationships with vendors. Those who are not prescriptive enough can find themselves at risk for regulatory or reputational damage. That’s why it’s critical for collections and recovery executives to open their channels of communication, keep those channels open, and keep an open mind if they want to strike the right balance.

Here are four best practices for debt collection vendor management you can use to set up your vendor relationships for long-term success.

1. Communicate Clear Expectations to Vendors Early and Often

Collections & recovery vendors should understand exactly what their creditor-clients expect from them from the onset of the relationship.

If you’re using multiple vendors for the same process (e.g., a collections agency), it helps to standardize your MSAs/SOWs/SLAs, says Jeremy Ruth, Sr. Director of Default Account Servicing at Arvest Bank.

But don’t just hand over those expectations and expect them to be met. Collections & recovery executives should work with their vendors to create those expectations, Ruth adds. This way, you and your vendors are on the same page.

Another simple way to express expectations is to create and share a deliverables calendar, says Bekah Luebcke, VP of Operations at Crown Asset Management. Collections & recovery vendors should be able to understand performance and compliance expectations - and whether or not they’re meeting those expectations - at a glance from their scorecard, she adds.

2. Your Collections and Recovery Vendors Have Expertise - Use It

It’s critical that collections & recovery executives treat their vendor partners like experts, says Carri McQuerrey-Funk, Head of Vendor Management & Initiative Execution at Citizens Bank. She tells her vendor partners to “tell her where [she’s] being stupid,” and cautions collections & recovery vendors against feeling like they “know it all.”

“You need an expert, and they are an expert,” McQuerrey-Funk says, so when a vendor partner gives you advice, you might want to take it.

It’s also a mistake to try to off-load risk to your vendors. Not only is it no longer possible for creditors to outsource their risk, but also, trying to do so will only sour your relationship with your vendors.

The best approach is a “shared risk/shared success” approach to vendor management, advises Ruth. “You can’t look at it like you’re going to transfer risk to [your vendors]. That’s a one-sided relationship.”

3. Expand the Conversation, Connect the Experts

An ongoing collections & recovery vendor relationship typically runs through two parties: the client services manager at the vendor, and the creditor-client's vendor manager. This is a great way to keep the relationship organized, but sometimes it’s not enough.

Connecting business units and SMEs can help you make sure that nothing is lost in translation, Luebcke explains. Some problems can only be solved by communication between business units instead of through the appointed relationship manager. It will save time and resources if the vendor’s SME can speak directly to the creditor-client SME, so don’t be afraid to take challenges out of their silos and get the real experts’ opinions.

4. Get Back to On-Site Audits

In the past, this would have been obvious. But after more than two years of a global pandemic and a major shift to remote work, many companies have fallen out of the habit. In fact, the number one question from the audience during the iA Strategy & Tech Vendor Management Masterclass webinar series was whether or not creditors were making onsite visits.

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McQuerrey-Funk, Ruth, and Luebcke, as well as T.R. Brown, VP of Consumer Finance at SmileDirect Club (all speakers on that aforementioned webinar series), all agree: If it’s safe, collections & recovery executives should be performing audits on site.

On-site audits allow you to gauge your vendor’s preparedness in a way that remote audits do not. If you’ve provided the agenda early enough, your vendor partner should have no trouble getting all the pieces in order, including getting the appropriate staff in the office prior to your visit.

If your vendor partner is disorganized during an onsite audit, for example, if they don’t have the right staff available to answer questions, it’s a signal that you may need to take a deeper dive into whether or not they are operating as prescribed by your SOW. It’s especially important to get onsite when you’re planning to audit new policies.

No vendor is perfect, but by following these four tips, collections & recovery executives can have a better chance at motivating vendors to be successful and in extending the success and the lifespan of any vendor relationship.

For more on how to successfully manage your vendors, check out The Vendor Management Masterclass II.

Bonus read: Creditors: Can You Outsource Risk by Outsourcing Collections? Not Anymore.

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