Inter-operator debt in the sector is at unprecedented levels, and expected to continue to rise. Alan Bray writing on behalf of Oriel Collections - a specialist Commercial Credit Management company based in the UK - explores how the industry's credit controllers can get to grips with the escalating levels of roaming debt.
Cash certainly is, and always will be, king
It is more important than ever for Operators to ensure they have an optimum credit and collections strategy in place when managing their roaming revenues. It is not unfeasible some companies may try and take advantage of the current economic environment by incorporating a delaying tactic into their overall corporate fiscal policy. If a company feels that there is no real pressure being placed on them to settle their payment obligations in a timely manner, then why not take advantage and slow up the settlement cycle?
In the context of roaming revenues, the three main challenges credit managers currently face are: keeping roaming debt to revenue ratio's low, improving cash flow and keeping inter-operator partnerships on a positive footing. Lack of available resource and effective collections technology are probably the two main obstacles faced by both Operators and their Financial Clearing agents when trying to achieve these objectives; however, by ensuring an effective strategy is in place, the risk of spiraling levels of inter-operator debt and its damaging effects can be minimised.
Working smarter, not just harder
Almost all credit managers have a good level of understanding of best practice credit management concepts, but the aforementioned lack of resource and available technology often results in a sub-optimal execution of the collections strategy.
Oriel is a specialist Commercial Credit Management company based in the UK, that has already helped Mobile Operators significantly: reducing their debt to roaming revenue ratio; improving cash flow and delivery to bottom line; and enhancing and improving inter-operator relations.
Case Study
A large Tier-One European Mobile Operator approached Oriel. They were unhappy with the levels of outstanding inter-operator debt listed on their books, despite the fact that they had outsourced the Financial Clearing Process to a third party clearing house.
Oriel was recruited to do a collections clear-up operation on 20 Million of outstanding debt which was in excess of 180 days delinquency.
After our targeted and focused collections approach, the operator has now less than 2Million on their books in total, of which 97% is under 180 days old. The Mobile Operator is now in a forward flow arrangement with Oriel: once debt hits 180 days outstanding it automatically gets passed to Oriel for collection. This arrangement facilitates greatly improved cash flow and financial planning capabilities for the company.
Outlined below are a few of a number of Proven Industry Principles (PIP) developed by Oriel which are proven effective in managing inter-operator roaming debt.
Four Proven Industry Principles
- 1. Profiling and Prioritising
Building profiles of roaming partners' settlement practices over time gives credit managers a clear basis on which to far more effectively adapt and prioritise their collections resource and strategy. Having identified them, they are also able to focus more closely on those roaming partners who are judged more likely to adopt a slow payment approach.
- 2. Balanced approach: Technology Vs. Manual
Technology plays a crucial role in enabling ‘best practice' collections, but pure technology strategies tend to give rise to pure technology responses. In other words, it is easy to deploy a scatter-gun approach to collections by configuring a system to automatically email out debt notification messages. But it is even easier, of course, for the recipients of those emails to configure their inboxes to filter out these messages and redirect them to another department, which could also choose to filter or ignore them. Therefore, technology is best utilised to support rather than replace what is the most effective means of collection: manual management.
- 3. Empathy delivers results
With credit control departments coming under increasing pressure to deliver collections in a timely manner, they may be tempted to initiate the collections process in a deliberate, cold and even adversarial manner. However, where they are operating in a market with a finite number of debtors, they are far more likely to get results by cultivating a strong ally within the debtor company. Taking a little time to build rapport with that employee, not only sows the seeds for better working relationships, but also creates common ground within which both parties can work together to resolve the debt. Empathy is a crucial factor.
- 4. Settlement trends merit continuous monitoring
It is inevitable in a changing market that certain external factors will influence the settlement trends of certain partners, FCH consolidation, for example. It is, therefore, vital that credit control departments continuously monitor, measure and evaluate their current practices. In doing so they can make the necessary adjustments to ensure that, in these difficult times, debt levels remain manageable, and cash remains king.
To find out how Oriel Collections can assist reducing roaming debt levels within your organisation, contact Trevor Deacon, on 0845 2261814
