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Debt Collection

A not-for-profit London housing association wanted to reduce its bad debts, which arose through non-payment of rent by tenants. Budgets imposed on the association were tight, so there was a need to generate new services that addressed debt recovery – but without generating increased costs.

The housing association had 6,300 tenants on its books and generated £24 million of income per year; however nearly 3,000 tenants were in arrears, generating a debt of nearly £2 million. Having established the project charter through a Kaizen event, the Lean-6 Sigma project team completed a Process Flow Diagram which identified reasons for non-payment of rent: tenants couldn’t pay, wouldn’t pay or needed help in paying their debts. Further analysis of debt information generated age and location profiles of debtors – and when applied to information about how the debt recovery team spent their time (most of the day was spent keying data into a database), it became clear where improvements could be made.

Changes such as de-duplication of documentation were effected, as well as the re-organisation of team structures and improvements in internal communications. The overall results of these changes added up to the recovery of £900,000 in bad debts, plus the prevention of tenants falling into bad debt in the first place by re-allocating staff to the front end of the debt recovery process. In addition, the need to hire more staff, at considerable annual cost, was avoided.