When in the collections industry, there is nothing more vital than key performance indicators (KPIs). They are an instrumental tool that helps you measure recovery on receivables in your collections cycle. Proper use of KPIs will help you evaluate how well your organization is doing to meet your goals.
Because KPIs provide raw data, it can be somewhat tedious to monitor every one of them. Therefore, organizations have to pick the few that seem most relevant to their bottom line. Luckily, there is a comprehensive look at the top five KPIs that act as indicators of the health and success of your collections agency.
It is a specific KPI measure that analyzes all the outbound calls to valid phone numbers of the debtor. Therefore, a higher number shows that an organization is successful at locating individuals from whom the collection is sought. We all know that the first step to debt collections and recovery is contacting the right person. Thus, a lower RPC rate means you need to analyze your methods of collecting user information and adapt accordingly.
Although there are multiple KPIs relating to calls, the RPC rate is the most relevant. You get to see whether your calls are reaching the right party, thus setting you up for success. Every collections organization that includes a call center needs to measure right-party contact to save on costs and improve their bottom line.
If you are looking for a more global view of your organization, CEI will give you all the information you need. It is a representation of your firm’s ability to recover debt from consumers. You get to see how the amount collected within a specific period matches up with the total amount of receivables within the same period.
An organization that collects on all debt within that period is said to be at 100% CEI. Therefore, collection agencies need to strive towards recovering their entire accounts receivable within a specific period. Also, CEI is critical in analyzing the direction in which your company is moving over a long period.
It is a critical KPI that measures the percentage of outbound calls where the debtor promised to pay. Unlike the RPC rate that gets you successful calls made, this KPI ensures you know the success rate of those outbound calls. It is a percentage that collections organizations need to keep at 100 if possible.
Start by comparing your numbers with your competitors to determine whether yours are lower or higher. A lower number means you need to evaluate your debt collection tactics during calls. It might also help to look into employee training programs should your numbers be considerably low.
How long a customer takes to act after receiving an invoice is critical in the collections industry. DSO will show you how many days it takes for a particular consumer to pay their debt after a sale is made, or an invoice is generated. Therefore, you can effectively compare how your organization is doing against other agencies within the industry. It is easier to know how much your collections agency needs to improve to catch up with the rest of the competition.
With DSO, the number needs to be as low as possible. An extremely high number shows how ineffective your firm is at collecting a debt. However, you need to rely on other KPIs to get the full representation of your organization’s position.
Have you ever considered how much profit your collections agency makes on each account in your collections cycle? Well, PPA can help you determine how every account impacts your bottom line. It is a metric that measures your organization’s gross profit against the total number of delinquent accounts within the same period.
Therefore, you can get to analyze what needs changing to improve your bottom line. For example, the problem might be with operating expenses, revenue, or the number of delinquent accounts managed. Ensure you monitor how each of the above inputs performs over a long period to help you make informed decisions.
Although collections organizations might need to monitor more than these five KPIs, it’s vital to start with the most relevant. At Enformion, we can help you take your collections effort to the next level with customizable solutions. Contact us today to improve the overall health of your organization.