Experian’s quarterly Business Benchmarking Report released numbers for Q3 showing the percentage of dollars severely delinquent (91+ days past due) has increased by 15.8 percent compared to September 2010. This goes to show why businesses are struggling with their debt collection efforts. 

 How do you know if you are getting the most out of your collections strategy? 

Wouldn’t it be nice if you knew exactly when one of your uncollectable accounts freed up some capital?

In my previous blog, I discussed the traditional use of commercial triggers for portfolio management purposes. However, many businesses are using triggers with their collections teams to get paid sooner.

 Commercial triggers offer notifications on balance change decreases, which from a collections standpoint means your delinquent customer is paying other vendors. Why aren’t they paying you? A new inquiry or a new tradeline trigger also indicates that the business is actively establishing new credit relationships which is an indication that they remain credit active.

Additionally, some traditional triggers used for portfolio management can also be used for collections.  Score change triggers as well as days beyond terms triggers can track positive payment performance indicating your customer is in a better position to pay you.

So while the business landscape may not be changing anytime soon – this doesn’t mean your collections strategy shouldn’t change either.  Work smarter not harder and get paid sooner!

When you’re on a tight budget, you definitely want to get the best bang for your buck. One way to do this is to evaluate your commercial collection process. For instance, start with deciding which accounts you go after first. By prioritizing your collection efforts, you’ll save a lot of time and recover your money faster. Here are a few helpful hints to keep in mind when prioritizing your accounts:

•  Segment your efforts by the number of days delinquent. This will help you categorize the seriousness of delinquency within your collections list.
• Determine your dollar amount thresholds. You may want to work those accounts with higher dollar amounts first and work down to the lower dollar amounts.
• Review your accounts for repeat offenders – debtors who have been in and out of collections but have always managed to pay their debt. You may handle these types of accounts differently than your more seriously delinquent offenders.
• Apply a ‘propensity to pay’ scoring model to help assess the risk of your accounts within the early stages of collections. This type of model would predict the likelihood the account will pay the debt. You can have a custom model developed or you can submit a file of your accounts to a vendor (like Experian) that offers this kind of model.

Look for future posts from me, and let me know if there are any specific topics about managing your portfolio that you’d like to see.

Most of us are pretty familiar with credit reports and scores, but how many of you are aware of the additional tools available to help you manage the entire credit risk lifecycle? I talk to credit managers everyday and as we’re all trying to do more with less, it’s easy to forget that opening accounts is just the first step. Managing risk on these accounts is as critical, if not more so, than opening them.

While others may choose to “ship and chase”, you don’t need to. Proactive alert/monitoring services, regular portfolio scoring and segmentation are key components that a successful credit department needs to employ in the constant battle against “bad” accounts. Use these tools to proactively adjust credit terms and limits, both positively and negatively. Inevitably some accounts will go bad, but using collection research tools for skip tracing and targeting services for debt collection will put you first in line for collections. A journey of 1000 miles begins with a single step; we have tools that can help you with that journey and all can be accessed online.