By James St. Clair and Daniel Goderis

The 9^th Annual Collection Manager’s Survey was presented at the 2018 ELFA Credit and Collections Conference, June 4-6 at the Omni Royal Orleans Hotel in New Orleans. Each year the session is highly attended by collection professionals from around the country and a lively discussion encompasses key points relevant to their success and challenges in the industry.

The moderators for this year’s presentation were Jim St. Clair of DLL, Robert Fagan of Eastern Funding and Dan Goderis of GreatAmerica Financial Services. Barry Ripes of PayNet again kicked off the session with PayNet’s industry data highlighting delinquency and default data for the equipment finance industry. The panel would like to recognize Bill Choi of ELFA for his expertise in compiling and analyzing the survey data that was presented.

A total of 73 member companies consisting of banks, captives and independents across all ticket sizes participated in the survey this year. The information captured consisted of delinquency trends by bucket, productivity measures of the respective collection staffs, new technology trends and implementation, pain points in administrative delinquency, loss performance and trends for 2018.

What We Learned from PayNet

According to the Thomson Reuters/PayNet Small Business Lending Index, 31-90 day delinquency percentages for 2018 are still low. In fact, the data show a slight overall increase over the years since 2013, but delinquencies are still well below the best of times in 2006. Mining and Transportation report the highest shift, with default rates declining more than 1% since 2016. Agriculture and Accommodations show a small increasing trend since 2014.

When reviewed by state, the South shows higher risk, but default rates are still hovering around 2% in most states, with Texas and Louisiana under 2.75%.

Areas of growth include Mining at 13%, Transportation at 10%, Construction at a strong third at 7%, followed by Agriculture and Retail at 2%. Lagging sectors include Accommodation, Professional and Manufacturing.

What Is the Bottom Line?

PayNet’s forecast shows that while 2017 had an average default rate of 1.8%, 2018 anticipates a 2.1% rate and the same is forecast for 2019. Industries have fluctuation, but the overall truth is that delinquencies are still well below historical averages of 3% and the recession of 2009, which had a 6.3% default rate. 

What We Learned from the Survey

Industry participants report continued low delinquency and loss percentages consistent with the past several years. While some members experienced an uptick from historical lows, 60% of the respondents feel the low delinquency trends will continue, up 2% from the prior year projections. Only 17% feel delinquency will increase, down from 29% in the prior year. A total of 25% of the industry respondents feel delinquency is improving. Welcome to the age of 1.4% delinquency.

Losses show an even better picture with 70% forecasting losses to remain the same, 15% forecasting worse losses and 15% forecasting better or lower losses. Positivity is at an all-time high.

Collection staff productivity remains consistent, with an average of 55 contracts worked per day. Tenure has increased to 10.4 years on average. The discussion on this topic was lively, with leaders experiencing hiring and retention challenges. Collections remains a stepping stone for building a career in equipment leasing and finance.

New to the survey this year was a question on administrative delinquency. The topic surfaced at last year’s Credit & Collections Conference in Baltimore, with members experiencing challenges as complexities in leasing increase. A total of 19% reported an increase, while 68% reported rates were flat or unchanged for 2017. The trend for 2018 shows 64% believe administrative delinquency will remain the same but 28% feel administrative delinquency will continue to rise. PO issues, multiple locations, customized invoicing and third-party payers all contribute to the increase.

Technology enhancement and implementation was a hot topic at this year’s conference. Email campaigns across all delinquency buckets, e-invoicing, online payment portals and portfolio scoring all built in efficiency gains and increased productivity. The use of analytics in creating collection strategies leading to better collection measurements is key to the continued success of the members. A total of 36% implemented a new collection system or software and 45% now use an online customer payment portal. Leasing 101 has been replaced by Leasing 401.

Thank You to Participants

The authors give a big hand to the session attendees for their interaction with the Conference panel and their peers. The topics discussed each year are selected because of participants’ desire to learn and grow and based on their input. Members are invited to share any feedback with the authors, as they are continually working to improve the survey and session.

James St. Clair is Outsourcing Director at DLL and Daniel Goderis is Director, Portfolio Management at GreatAmerica Financial Services. Both are members of the ELFA Credit and Collections Planning Committee. For more on this topic, a recording of the “Collections Managers Survey” from the 2018 ELFA Credit and Collections Management Conference is available in ELFA’s Conference Resource Center at http://elfa.sclivelearningcenter.com/index.aspx.