Income collection needs to start as a technology challenge, with the automated elements being made to work harder so that the people element can work smarter, explains John Doyle, managing director of The Housing Contact Company.
As the roller coaster of the financial year for housing providers continues its relentless cycle, most income teams find themselves on that pleasant descent down the other side of the hardest climb on the ride, namely the financial year-end. Now is a time to almost enjoy the scenery and plan any objectives for the coming year. It can feel like a childhood summer holiday, where the end seems so far away that it is not worth worrying about yet. Nobody wants to revisit the stress-filled days of the year-end just past, or for that matter think about the probability that the cycle will repeat all over again next February/March. However, the big question is will next year be the same, better or worse?
It goes without saying (I hope) that everyone would like it to be better next year, but I bet if we polled the income managers at a broad range of housing providers, the majority would expect the rush, panic and obsession to hit the year-end number for 2015/16 to be worse. With this being the first year to feel anything like the full impact of the universal credit roll out, that is not too surprising, but it is probably safe to predict that the next year-end will be far worse than anyone is expecting unless a much smarter way of working is found.
I would describe the approach taken last year, and probably in most previous years, by the majority of housing providers as an example of working harder for their income as opposed to not necessarily working that much smarter. Typical approaches have involved increases in personnel or at least overtime for existing people, with everyone focused on a target percentage that has to be achieved, almost regardless of cost. That in itself is a risky approach, but next year it could prove futile, if not fatal, for some housing providers.
For the first time in recent memory, housing providers will have to compete for the bulk of their rental income. This will not be a challenge just for the income team, but one that needs to be faced by the entire organisation.
Income collection is your problem
I will repeat that point for added effect; if you work for a social housing provider and operate under the illusion that income collection is not your concern, then give that a second thought when you receive your next salary payment. Everyone’s livelihood depends on your tenants paying for the services you deliver, so everyone needs to think how they can help.
For any organisation to compete effectively, it has to work smarter: This starts in the IT department with the need for accurate and timely arrears data. There is no point complaining about whatever flavour of housing management system you are using for this; they are all as bad as each other according to the recent academic study that was carried out by Sheffield Hallam University and referenced in the last issue of this magazine.
In the world of universal credit where a tenant may receive their direct payment on any day of the week, income teams will need to know as soon as possible if a rent payment has been made or not. For example, if the direct payment is made on a Monday, but a missed rent payment is not chased until the Friday of that week, then growing arrears are inevitable. Let’s be honest; identifying actual arrears by the Friday would be a minor miracle for most systems right now, so the scale of the challenge is enormous.
Competing for rent
It’s even worse when you consider that your new competitors, such as BrightHouse or Wonga or even the regular utility companies, will have their data sorted and be acting on it quickly, so why not housing providers? As ‘That Housing Guy’ Tony Smith commented at the Housing Technology 2015 conference in March, “social housing is struggling to get to grips with little data, never mind big data!” He was right, so there has to be a major improvement in the face of direct payments.
The second component of a smarter process is the need to segment the different categories of arrears and then automate the delivery of the appropriate collections messaging; a ‘one size fits all’ mentality is simply not smart enough.
What I mean by segmentation is the arrears status of each individual tenant in your escalation process. Obviously, this is a dynamic situation that again needs to be facilitated via IT in terms of the provision of regularly-updated arrears status data, but that is essential if you are going to able to target the right people with the right message at the right time. Someone who has only ever missed one payment probably just needs a gentle reminder, as opposed to someone with an escalating or recurring arrears problem. These distinctions are generally being made by individual income managers at the moment, in what is usually a time-consuming and inconsistent manner. All of this needs to be standardised and then automated.
The final element of this smarter approach to income collection is establishing a consistent strategy to distinguish between where further customer support is needed and where greater enforcement is required. The notion that each individual case has to be judged on its merits by a committee of income officers is simply no longer sustainable. There will obviously need to be the usual safety valves, balances and measures applicable to any automated process, but the Pareto Principle will always apply, where the majority of the issues will be automatically resolved by the process, leaving only the exceptions to be dealt with by the income team.
Scaling for growth
None of this is rocket science, and I know there are a few housing providers already working on this kind of process. However, most housing providers employ sizeable teams to do all these elements manually. It is hard work no doubt, but as the scale of the task increases, they cannot simply be multiplied. They will also be needed to focus on the more complex challenges that the full roll out of universal credit will undoubtedly present over the next couple of years.
There will be many tasks where people skills are essential, but the key challenge right now is to identify those that are less complex and can be automated effectively. The income collection challenge really is about getting the machine to work harder so the people can work smarter. The technology is out there, it just needs to be embraced.
John Doyle is managing director of The Housing Contact Company.