3 Things To Think About Why Your Organization Needs Debt Scoring For Your Delinquent Debt
In today’s challenging and difficult economy, businesses of all sizes are facing ever-growing delinquencies in their accounts receivable and mounting debt portfolios. As any organization’s in house debt recovery procedures play a very important job in collecting outstanding, past due debt, most businesses just don’t have the available time, money and skill necessary to collect efficiently and consistently.
In addition, most organizations throw away precious funds, time and resources, not having a well thought out plan when it comes to collecting their outstanding, past due debts. For example, most businesses aren’t aware that for any given book of debt, 90% of successful debt recovery takes place on about 50% of their debt portfolio. The fact is, many businesses waste precious time going after accounts that aren’t likely to pay at all. The question is which 50% to go after?
Debt scoring is being used more and more as a valuable and cost effective tool for companies to get a better handle on collecting their outstanding receivables.
What is debt scoring? Debt scoring is basically a probabilities forecasting model. By employing mathematical algorithms and formulas, scoring has the ability to take your business debt portfolio, and forecast, with precision, a debtor’s likelihood of paying their debts, which accounts are apt to go into default, which are likely to be written off, and which ones to outsource to a collection agency. Debt scoring uses information, such as your own company’s internal accounts receivable and collection performance data, along with other key important information. This can predict, with reasonable accuracy, a customer’s payment pattern and behavior.
Equipped with this central information, businesses can make decisions earlier and map out an effective debt collection strategy and course of action. These decisions can be made on a customer-specific basis.
Here are 3 reasons why your company should consider debt scoring for your delinquent receivables:
You can commit your in-house debt collection efforts on the accounts deemed more likely to pay you. This will reduce staffing costs and save time. You can focus on the accounts that will pay sooner, and outsource the more “problem” accounts to a debt collection agency.
Debt scoring can help conserve accounts before they go into default. For example, banks and credit unions can better check the condition of their loans, checking and share draft accounts. They can then better forecast which accounts to devote more attention on, before they go into default. Again, the more problem accounts can be siphoned off to a collection agency.
With debt scoring, you can employ more custom-made collection strategies, specific to the particular customer, based on the level of difficulty. This again, saves time, money and staffing requirements.
David P. Montana has written and published generally and functioned as a business advisor with regard to collection agencies services for 30 years. David provides many more beneficial information and resources concerning debt scoring.