Typical
Two Stage Approach for Collections
It has been our experience that most companies and organizations
typically use a 2-Stage conventional approach to collections.
It has been the industry standard for many years and it is
what most companies use. The reason for this is the high
cost associated with collections as most agencies and attorneys
charge an average of 30% to 50% of the value of the account
collected.
Typical drawbacks to this method of collections are:
- High cost of collections
- Low recovery rate
- Loss of customers
Most companies will work their accounts until they give
up and then will place them with a collection agency or an
attorney when there is very little chance of recovery. Anything
that is recovered is considered found money. Most companies
will spend between $21.00 and $ $38.00 per account not getting
their accounts collected before they send them for external
help which by that point is like Throwing good money
after bad. Once an account is assigned for collections
it is not worth the paper it is written on in most cases.
According to Paul Mugnini, President of The National Association
of Credit Managers, When you allow an account to go beyond
90 days all your profit in that sale is gone. In addition
he highly recommends that a company seriously consider using
a collection agency at 60 days.
SR2 Three Stage Approach to Collection Management
SR2 – Strategic Receivable
Resolution, having over 50 tears experience in the collection
industry, realizes that a typical two-stage approach to
collections is not always the most beneficial collection
solution for our clients. Therefore we have developed a
three-stage approach to collections.
With a three-stage approach to your organizations collections
you will receive the following benefits:
- Controlled cost for collections
- Increased recovery
- Reduced internal account billing cost
- Identify intent of your debtor earlier
- Conformity of knowing what is being said to your debtor
By using a three-stage approach to
collections SR2 enables our clients to maximize their internal
collection efforts, stage-one. With most organizations, like
yours, their staff is able to identify which debtor is going
to be a slow or a non-paying debtor within the first three
to four contacts with that debtor, usually within the first
60 to 90 days. At that time SR2 recommends that you assign
the account for diplomatic pre-collections, stage two, where
we can recover a greater portion of your money more quickly
and, if possible, retain the relationship with your client.
Those clients identified as hardcore are then transferred
to Stage 3 for more intensive collection measures and recovery.
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