Increasing recovery performance from your bad debt portfolio can be just a simple tweak.
As we continue to deliver best in class results for all North America, we wanted to share with you our secret, that's not so secret.
The incremental liquidation to recovery rates has been the result of one small adjustment, with profound benefits.
So what changed and how can this help creditors in our industry today?
We shifted our perspective on the "value of time".
Today, many industries still use scorecards and performance reports that have been unchanged for decades.
Personally, I think our world moves a lot faster when it pertains to accounts receivable management. More activities occur in less time, yet one of the most important parts of our business did remain stagnant. Scorecards.
On average, for every day that goes by on bad debt, a creditor can lose $8 of the principal balance in a consumer's propensity to pay. Time is key, as AR starts to expire like a glass of milk left on the table-top.
So why do many still use scorecards and performance models from the 1990's? An opportunity for creditors to get more recoveries in less time is by changing outdated measurement periods, (the runway).
Many creditors still use assignment periods of 12, 24 or 28 months per tier.
Even though incremental gain of dollars collected by batch declines just after 120-days.
One can easily see long winded measurement periods offer little to no value when gauging roll rates by product.
In fact, a champion vs. challenger use case showed -
Keeping bad debt for an extended period of time with any one collection supplier was negatively impacting the overall recovery rate %.
And it makes sense, a collection agency isn't going to continue to pour limited resources with the same intensity 4-months later after the initial placement.
Ask any collection supplier and most if not all will agree, resources today are more scarce than they were 20-years ago. Aside from far higher operating expenditures, client commission rates for agencies have significantly dropped.
The resources invested by a collection agency on your business, does have limitations.
So where is the opportunity?
A creditor can easily increase their overall recovery rate by slicing up their long winded measurement periods and create more penetration, by avoiding having one agency exhaust resources over 12-28 months (per tier) as many creditors still do.
One could, (as an example), have six tiers of different agencies in shorter 120-day measurement periods. Agencies recognize the first 90-days of placement is what will matter the most. Hence, why they pour out all those resources within the first 3 months before tapering off.
Why not have greater penetration from more than one supplier over the same runway?
Our best in class performance has proven benefits from this pivot in strategy.
While many things have obviously evolved in our industry, creditor scorecards in many cases still remain unchanged.
Need a quick win? Revise long winded and outdated measurement periods. Give it a try, run a pilot or champion/challenger. Have your file placed with a new collection agency after performance peaks and tapers off after 120-days.
Your roll rates will get a spike where normally they'd start to decline, impacting your overall liquidation and benefiting your dollars recovered.
Peter Manianis
Vendor Manager 3rd Party Collection Agencies
Mobility Marketing – Strategic Planning & Execution
TELUS | the future is friendly
Mobile: 778.877.6198
peter.manianis@telus.com