Industry Insights
May 16, 2024

How to Effectively Segment and Prioritize Past-Due Accounts for Optimal Recovery

Learn strategies for organizing and tackling your community's debt portfolio efficiently.

As a property manager, one of the most challenging aspects of debt recovery is deciding where to focus your efforts for maximum impact. With a portfolio of past-due accounts that may vary widely in terms of balance size, delinquency stage, and resident responsiveness, it can be overwhelming to know where to start and how to allocate your resources effectively. However, by implementing proven strategies for segmenting and prioritizing your debt portfolio, you can streamline your recovery process, improve your success rates, and ultimately boost your community's financial health. At Advanced Collection Bureau (ACB), we've honed our expertise in portfolio management over decades of partnership with multifamily properties of all sizes. In this article, we'll share some of our key insights and best practices for organizing and tackling your past-due accounts efficiently.

Categorize Accounts by Balance Size

One of the most basic but important ways to segment your debt portfolio is by balance size. This involves grouping accounts into different tiers based on the amount owed, such as:

  • Small balances (e.g., under $500)
  • Medium balances (e.g., $500 to $2,500)
  • Large balances (e.g., over $2,500)

By categorizing accounts in this way, you can quickly identify which ones represent the highest potential recovery value and allocate your resources accordingly. For example, you may choose to prioritize large balance accounts for more intensive collections efforts, such as legal action or skip tracing, while handling small balance accounts through more automated or streamlined processes. At ACB, we work with our clients to develop customized balance thresholds and treatment strategies that align with their unique portfolio composition and recovery goals.

Assess Delinquency Stage and Risk Level

Another critical factor to consider when segmenting your debt portfolio is the stage and risk level of each account. This involves evaluating how long the account has been delinquent, as well as any other risk factors that may impact the likelihood of recovery, such as:

  • Previous payment history and behavior
  • Resident communication and responsiveness
  • Employment status and income stability
  • Property type and lease terms

By assessing these factors, you can assign a risk score or category to each account and prioritize those that are most likely to result in successful recovery. For example, you may choose to focus on accounts that are newly delinquent and have a history of prompt payments, as these may be more responsive to early intervention efforts. Conversely, you may assign lower priority to accounts that are severely delinquent or have a history of broken promises, as these may require more extensive and costly recovery efforts. At ACB, we use advanced analytics and behavioral scoring models to help our clients predict and prioritize accounts based on their unique risk profiles.

Consider Resident Segmentation and Personas

In addition to balance size and risk level, it can also be helpful to segment your debt portfolio based on resident characteristics and behaviors. This involves identifying common traits or patterns among your past-due residents and grouping them into distinct personas, such as:

  • The "Forgetful" Resident: Generally pays on time but may miss a payment due to oversight or busy schedules; responds well to friendly reminders and automated payment options.
  • The "Struggling" Resident: Wants to pay but may be facing financial hardships due to job loss, medical issues, or other circumstances; benefits from empathy, flexibility, and connections to community resources.
  • The "Unresponsive" Resident: Consistently avoids or ignores payment requests and communications; may require more assertive or escalated recovery efforts, such as legal action or credit reporting.

By segmenting residents in this way, you can tailor your communication and recovery strategies to their unique needs and preferences, leading to better engagement and results. For example, you may choose to send "Forgetful" residents automated text reminders and payment links, while offering "Struggling" residents personalized payment plans and referrals to financial assistance programs. At ACB, we train our collectors to identify and adapt to different resident personas, using a mix of behavioral science, empathy, and problem-solving to drive successful outcomes.

Optimize Your Timing and Touch Points

Once you've segmented your debt portfolio based on balance size, risk level, and resident persona, it's important to optimize your timing and touch points for each group. This involves determining the ideal frequency, cadence, and communication channels for your recovery efforts, based on factors such as:

  • Average time to payment for each segment
  • Past response rates and preferences
  • Legal requirements and best practices
  • Resource availability and cost-effectiveness

For example, you may find that small balance, low-risk accounts respond best to a series of gentle email reminders in the first 30 days of delinquency, while large balance, high-risk accounts may require more immediate and intensive phone and mail outreach. Similarly, you may discover that certain resident personas are more likely to engage with text messages or social media, while others prefer traditional phone calls or in-person visits. At ACB, we use data analytics and A/B testing to continually refine our contact strategies and optimize our results for each client's unique portfolio.

Monitor and Adjust Your Strategy Regularly

Finally, to ensure that your segmentation and prioritization strategy remains effective over time, it's essential to monitor and adjust it regularly based on performance data and feedback. This involves tracking key metrics for each segment, such as:

  • Recovery rates and yield
  • Average time to payment
  • Contact attempts and response rates
  • Resident satisfaction and retention

By analyzing these metrics on a regular basis, you can identify areas for improvement and make data-driven decisions about where to focus your efforts for maximum impact. For example, if you notice that a particular segment is consistently underperforming, you may need to adjust your contact strategy, offer different incentives, or escalate to more advanced recovery tactics. Conversely, if you find that certain segments are generating strong results with minimal effort, you may choose to allocate more resources to those areas and scale back on less productive ones. At ACB, we provide our clients with detailed performance reporting and insights, along with expert recommendations for optimizing their strategy based on industry best practices and trends.

The Bottom Line

Segmenting and prioritizing your past-due accounts is a critical step in developing an effective and efficient debt recovery strategy for your apartment community. By categorizing accounts based on balance size, risk level, and resident persona, and optimizing your timing and touch points for each segment, you can focus your efforts where they will have the greatest impact and achieve better results with less wasted time and resources.

Of course, implementing a sophisticated segmentation and prioritization strategy can be complex and time-consuming, especially for properties with limited staff and technology resources. That's where partnering with a specialized debt recovery firm like ACB can provide significant value and expertise. Our team of experienced collectors and data analysts works closely with each client to develop custom segmentation models and contact strategies that align with their unique portfolio needs and goals, while leveraging cutting-edge tools and best practices to drive superior results.

If you're looking to take your debt recovery performance to the next level through smarter segmentation and prioritization, we invite you to contact us at ACB. We'll work with you to analyze your current portfolio, identify areas for improvement, and develop a tailored strategy that maximizes your recovery potential and minimizes your risk. With the right approach and partnership in place, you can conquer your past-due accounts with confidence and ease, and keep your community on the path to financial success.

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