Using Decision Analytics to Increase your Collections and Net Back.

While there is more debt in the market place to collect, the fact is that much of this debt is uncollectable in today’s economy.  One way to increase your effectiveness in collecting your bad debt is to use analytics to predict the probability that a debtor/debtors will make payments.

Delinquencies in the banking (mortgages, car loans, personal and business loans, credit cards, the number of overdrawn accounts) industry have increased dramatically.

While the amounts of debt are increasing, actual collections are decreasing and this is resulting in decreased ROI.

In order to predict future collections we must look to past credit histories.  Past methods of using traditional demographics, age and size of debt, are not effective in today’s environment.  

According to the American Collectors Association;

•    50% of customers with bad debt have the ability to pay the debt, they simply choose not to.
•    80% of all accounts collected by collection agencies are collected by written demands.
•    The older a debt becomes the less collectable it is.  At 150 days past due the likely hood of recovery  decreases by over 49%.
•    Debtors prioritize which bills to pay according to the perceived consequences.  In most cases the perceived consequence of not
      paying the phone or cable bill is greater than the consequence of not paying an overdrawn checking account or loan.

Collections profitability depends on the quality of decisions on who, when and how to collect a debt.

Most creditors ask “given everything I know, what is the best action to take for this customer right now.”

Various actions have different costs associated with them.

The real question that needs to be asked is “Of all the actions I could take now, which has the greatest benefit?”

The decisions to be made in either care are very similar;

•    When do I contact a customer?
•    Which customers do I contact first?
•    How do I contact a customer?
•    What do I say to a customer?

Determining who, how, when and what to say is what Predictive Collections Analytics does.  It predicts the probability that an actively worked debtor will make significant payments.

Some debtors will make significant payments with minimal, inexpensive efforts, others require more intensive efforts.

Analytics predicts the probability of payment and can be used to reduce collection costs by prioritizing debtors and delaying more expensive collection efforts for those most likely to make payments.

Rick Toot is a senior account executive for American Agencies, a nationally licensed, bonded and insured collection agency and a member of the ACA and an Associate Gold Member of the ICBA.  He can be reached at; 704-566-4079 or emailed at; rtoot@americanagencies.com