For lenders, deciding to switch to new loan servicing software is a big deal. There are multiple factors to consider, and being prepared for the transition is crucial to having a successful implementation.
Loan servicing software is the core of any lending company. It's what keeps track of payments, loan terms, interest, and collections. It’s the essential core of your business. And it's complex. As companies diversify and offer multiple loan products, combined with evolving regulations, many are forced to scrap their existing system and upgrade to a system that provides more flexibility and room for growth. However, even though the need for change may be apparent, it's tough to jump in. During the next several months, we'll explore the factors involved in successful implementation of new loan servicing software. Our first post will look at what we think are the top three considerations, based on our team's decades of experience.
Carefully Defined Requirements.
Nothing will be more useful as you shop for, choose, and implement a new platform as carefully defined and well thought out requirements. The wrong software might be selected if a full view of the requirements is not identified. Be very clear on what is needed in order to ensure a smooth and successful implementation. Be certain to get input from every department that will use the software, including accounting, customer service, management, collections, and recovery.
In addition, make sure everyone is using the same terminology with regard to the proposed platform. Often times, the software vendor and any external members of the implementation team use different terms to describe the same thing. If terms are not clearly defined amongst all stakeholders up front, misunderstandings are possible. We've experienced situations where implementations were slowed down considerably simply because there were misunderstandings around terms. For example; “draw” vs. “purchase”, “loan” vs. “transaction”, etc. It’s almost always a mistake to assume everyone is on the same page, so clearly define the terminology among your in-house team and your software provider.
If part of the plan is to add new loan products, it can pose a risk to the implementation because requirements for new products tend to change frequently and requirements are often defined poorly. It’s important to have flexible software if new products are the plan. Requirements should be organized along the loan life-cycle to include consideration of payment cycles - monthly, annual, or otherwise. Requirements are more than just the functionality of the system (functional requirements), and should include reporting needs, technical/infrastructure, processing time/performance, etc.
If a need for new software has been established, and you've gathered input from all departments, you're well on your way to getting buy in from all departments. It’s essential that all stakeholders are in agreement on the course of action as the implementation progresses and various challenges are met and handled. If everyone is positioned well to meet the various deadlines and help overcome any bumps in the road, chances of success increase exponentially.
Establish and Be Clear in Priorities.
Once the requirements are identified, the scope of the implementation can be finalized. Priorities must be clear when considering deadlines or changes to requirements. Often times, this calls for trade-offs and it’s critical that the most important project tasks are completed first. Priorities can also be used to break the implementation into phases. Priorities should take into account any prerequisites and dependencies.
Spell Out Project Ownership and Roles.
The lender must take sole ownership of the project. They know their business better than anyone, and they know what they want from the platform. This knowledge puts them in the ideal position to drive the implementation to completion. Vendors and outside consultants may serve in roles that are essential for overall success of the implementation, but their role is not project ownership. If the lender refuses to take project ownership, the project is being structured for failure from the start.
The lender needs to have an “Executive Steering Committee,” which will allow the executive team to own the project. This committee will foster accountability, address resource needs, and ease the decision making process. A project manager helps direct the flow of information and keep the implementation team organized. We also suggest indentifying subject matter experts for all key areas (accounting, customer service, reporting, collections, and IT). These subject matter experts can provide requirements for the various departments as well as being available to quickly answer questions when needed. Regular status meetings will help maintain visibility and momentum.
Implementing new enterprise software is a major undertaking. We hope these tips get you going in the right direction. We'll be writing more on this topic in the coming months, so stay tuned for more insights from our experience with assisting hundreds of clients implement our loan servicing software.