Fairness in aged debt: Using AI to improve collections without losing the human touch

Managing aged debt is a significant challenge for local councils, impacting financial management and public services. With £5.5 billion in unpaid Council Tax and £2.5 billion in National Non-Domestic rates, the suspension of recovery activities during the Covid-19 pandemic has only exacerbated the issue. However, leveraging AI and automation can greatly improve debt management, offering a balanced approach that combines efficiency with empathy.

Following the recent DCN annual conference where we held a panel session on aged debt, here are my top five take-aways for how councils can leverage AI to support public services.

1. Assess the impact – It’s important to understand the impact of your aged debt: Aged debt presents substantial challenges for local councils, affecting their ability to provide essential services and manage resources effectively. The financial implications are profound, as unpaid debts hinder councils' capacity to allocate funds where they are most needed. This situation calls for either additional resource or innovative solutions that can streamline debt recovery while ensuring fair treatment of vulnerable individuals.
2. Flag vulnerabilities – AI could be that innovation to help you support the vulnerable: AI and automation offer promising solutions to enhance efficiency in debt management. By monitoring calls and chats, AI can help flag potential vulnerabilities and suggest appropriate responses, helping staff make better decisions. This technology supports staff in maintaining control over conversations, ensuring that interactions are handled with both efficiency and empathy.
3. Make a clear plan – You need a comprehensive strategy for this area: Effective debt management requires a balance between technological innovation and human empathy. Councils need to develop strategies that utilise data analytics and trained teams to enhance recovery efforts. By using AI to analyse data quickly and more deeply, councils can identify patterns and develop more effective approaches to debt collection, ensuring that vulnerable individuals are treated fairly.
4. AI driven efficiency – AI can help efficiency even with additional resource: AI can help streamline operations and improve efficiency in debt management, helping staff maintain control over conversations and enhance decision-making by monitoring interactions and suggesting appropriate responses. This approach not only improves efficiency but also ensures that vulnerable individuals receive the support they need.
5. Improve collection rates – The benefits for using AI and automation could be significant for maintaining public services: implementing the right approach to aged debt can lead to improved cash flow, better resource allocation, and enhanced community services. Councils that effectively manage aged debt can reduce write-offs and bad debt provisions, ultimately benefiting residents through improved services. By leveraging AI and data analytics, councils can certainly help their financial position to better support the community.

My thanks to our panellists on the day, the brilliant Ed Bowen and awesome Nikki Powell, who discussed the how managing aged debt effectively requires a balance between technological innovation and human empathy. The insights and experience they shared really highlighted the importance of utilising new AI capability into a comprehensive approach to debt management, ultimately leading to better financial stability and improved community services. By adopting the right approach to AI, councils can achieve better financial outcomes and improve the quality of services for their communities.

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