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What’s Your Success Ratio?

This might be the question I’m asked most often after of course how much do you charge.  The answer is on average we have about a 30% success ratio.  Meaning we collect about 30% of what we see come through the door.  But averages can be misleading.  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 small court not with a collection agency. 

Old balances – The older the balance the less chance you 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 your results will be diminished. 

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 billing, late billing or no billing.  If you billed your customer or patient incorrectly, or months after the fact the agency will have harder time collecting and the “success ratio” 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.

Combine one or more of these problems and …. well you can do the math:)

 

 

 

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