The Truth about Success Rates
What is your success rate and how much do you charge? These are the 2 questions virtually everyone asks. The answer is, on average we have about a 30% success rate.
Now, go check out some other agencies online and see what their success rates are. Most will tell you about the same thing. One agency we know of claims an 85% success rate “on viable claims”. So they only count the “viable claims” i.e. the good ones. Note; they still fail 15% of the time ON the GOOD ones.
A 30% average collection rate is considered good but averages can be tricky. Think about it. Let’s say I tell you I have a 50% average collection rate on “viable claims”. Assuming I’m telling the truth let’s imagine I have 2 claims. I collect 100% of the 1st claim and 0 on the other. Voila 50% average collection rate! Wow I’m great aren’t I? Unless you’re the guy I collected nothing for.
A Better Question?
My point is, this isn’t the right question. The right question is about your particular claims collectability. What are the chances that “my claim” is collectable? Once we have that conversation you’ll probably have some useful information.
Here are some of the things that will contribute to a poor return:
Disputed Balances – Turning a disputed balance over to a collection agency is generally not productive. If the balance is high enough some agencies will be willing to negotiate the dispute with your debtor but for the most part you know the facts of the case and are better able to discuss it with your client or debtor than a collection agency can. If a credit is due your client or if issuing a small credit will settle the dispute it will cost you less to issue it than it will cost you to pay the agency. Disputes that cannot be resolved belong in court, in front of a judge, not with a collection agency.
Old Balances – The older the balance the less chance you or we have of collecting it. Research shows that collectability of balances over 1 year is about 25%. We’ll take them up to about 3 years but if you want a better return turn it over sooner.
Poor Contact Information – If you don’t have good contact information the agency can skip trace it for you, that means use their resources to find the debtor, but if you have no information to begin with they may not find anything. You need at least 2 pieces of identifying information, i.e. full name and social or full name and address. We’ve had creditors give us accounts with a first name only, no phone, no address etc. Get complete contact information in front, it will improve results on the back end.
Incorrect, Late or No Invoice – If you billed your customer or patient incorrectly, or months after the fact the agency will have harder time collecting and the “success rate” will be lower.
Poor documentation or lack of documentation – if you don’t have a paper trail or any documents proving the balance is due, success will be diminished. Whatever service you’re providing you should have some kind of signed agreement just in case the relationship goes bad. It’s very common for a debtor to refuse to pay because he didn’t sign anything.
Fraud – If the debtor set out to rip you off it’s very unlikely an agency will do any better collecting than you did. Thieves have more way to steal than we have to collect but most importantly they don’t care. Your debtor needs to care in order for collection attempts to be successful. If they really don’t care, collections is not likely to be successful.
Combine one or more of these problems and …. well you can do the math:)