In my 15 years in the RTO industry, I have managed stores for both corporate and independent dealers. I have also served as a consultant. I think it’s fair to say that there as many different ways to measure and control delinquency as there are companies serving the industry.

I have built many successful stores using many different methodologies, but the following program allowed me to build my strongest store yet. I’d like to share the following principles with you in hopes that it may bring you similar success.

It's all about Renewals
It’s no secret that successful “renewals” will promote store growth. Many operators use a system of standardized renewal dates (i.e. Saturday for weekly agreements or 3rd of the month for monthly agreements) and measure their success using a closing percentage on a particular day of the week, Saturday for instance. I’m not saying that this more traditional system of managing delinquency is wrong or ineffective. I used this same system for years and in all fairness, I was able to build a fairly strong store. But when I decided to leave my corporate-owned store to work for an independent rental dealer, I was taught a different way to control and measure renewals. Based on their principles, I went on to build my strongest store to date. It was a little difficult to change my thought process in the beginning, but I quickly started to see the benefits of this program. Quality growth came easily and soon the revenues and store profit followed.

Renewal Dates
Base the renewal (or due date) upon the customer’s payday or the best day for them. Coming from the corporate rent-to-own mind set, this was a difficult theory for me to accept. After many debates, I accepted this theory and put it in to practice. The truth is that a customer will pay you on the day that is most convenient for them, so let the customer choose their renewal day. I was blown away when I saw how well this worked.

Measuring Renewals
I also learned a different way to measure delinquency using a “weighted point system”. This system put the emphasis on the agreements that were furthest expired. The break down of this system is as follows:

To calculate “allowable” points, multiply the store’s BOR by 25%.

Subtract the “actual” points from the “allowable” points to determine the point close. The goal is to stay on the positive side of the point system every day. Remember, Saturday means nothing on this system.

To further demonstrate, I have created a hypothetical scenario.

Store XYZ has 700 BOR. 25% of 700 BOR equals 175 “allowable” points.
Store XYZ’s delinquency breakdown is as follows:

Subtract the 109 “actual” points from the 175 “allowable” points. Store XYZ’s point close would be +66 or “positive” by 66 points. If logic prevails, the account manager would want to clear the accounts with the highest point value while preventing new accounts from crossing over to the higher point value.

Counseling The Customer - You would never expect an employee to understand the theory of on-time renewals after only one explanation, so why would you expect the customer to understand this theory after only one explanation (i.e. - the agreement close). Explain the importance of on-time renewal to every customer every time they make a payment on an expired agreement. Ask questions and involve the customer in the solution to their late renewal problem.

Here are a few facts:

A customer that renews on time will be more satisfied with your services. This increased level of satisfaction results in both repeat and referral business.
We are not doing the customer a favor when we let them renew late. When we let them renew late, we risk putting the customer in a position were they have no option but to return our product and rent elsewhere.
If a customer renews on time, you’ll never need to call them. Would you want to do business with a company that calls you every week asking for money? If you solve the problem through proper counseling, you won’t have to make that call and that time can be spent marketing the store.

Here’s what the program did for me:

Out of my total rental income, I received two-thirds of that income in advance rental payments (payments made on or before the due date based on the High Touch computer system’s rental income break down).
I experienced tremendous growth in both revenues and BOR count while leaving very little money “out on the streets” because the emphasis is on the accounts with the higher point values (7-13 and 14+).

The Most Frequently Asked Question:

Q: Without standardized due dates, I’d have “fall-out” every day! How can I ever “close-out” my route?

A: Let’s say your store has a weekly “fall-out” of 120 accounts. Would you rather have that “fall out” occur at a rate of 20 per day or all 120 in one day? It seems to me that 20 per day is much easier to handle. Again, remember that the goal is to be positive on the point system at the close of everyday. For those of a weekly mind set, look at it like this, “Every day is Saturday!” In the real world application of this system, stores have a small “fall-out” per day. This new “fall-out” is called and committed for payment by the close of business the same day (since the due date is based on the customer’s payday) and the cycle starts again the next day.

In closing, I only ask that you consider the merits of this program. I hope that at the very least, it will stimulate some conversation within your rental organization. This program changed my thinking about delinquency and how I conduct business. I have to say that I am a better operator today because of this program. Please feel free to E-mail comments on this article, as your feedback is greatly appreciated.