3 Things To Think About Why Your Organization Needs Debt Scoring For Your Delinquent Debt
2:49 AM
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 more becoming an effective and cost beneficial tool for companies to better speak to the problem of collecting on their delinquent receivables.
What is debt scoring? Debt scoring is essentially 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 probability of paying their debts, which accounts are liable 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.
Given this kind of valuable information, organizations can arrive at decisions earlier to chart a course of action and collection strategy. Businesses can make these determinations on an account-specific basis.
Here are 3 reasons why your company should consider debt scoring for your delinquent receivables:
You can direct your internal debt collection efforts on the accounts that are more likely to pay you. This will reduce staffing costs and save time. You can concentrate on the accounts that will pay sooner, and outsource the more "problem" accounts to a debt collection agency.
Debt scoring can help save accounts before they go into default. For example, banks and credit unions can better monitor the state of their loans, checking and share draft accounts. They can then better predict which accounts to direct 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 execute more tailored collection strategies, specific to the particular customer, based on the level of difficulty. This again, saves time, money and staffing obligations.
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 more becoming an effective and cost beneficial tool for companies to better speak to the problem of collecting on their delinquent receivables.
What is debt scoring? Debt scoring is essentially 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 probability of paying their debts, which accounts are liable 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.
Given this kind of valuable information, organizations can arrive at decisions earlier to chart a course of action and collection strategy. Businesses can make these determinations on an account-specific basis.
Here are 3 reasons why your company should consider debt scoring for your delinquent receivables:
You can direct your internal debt collection efforts on the accounts that are more likely to pay you. This will reduce staffing costs and save time. You can concentrate on the accounts that will pay sooner, and outsource the more "problem" accounts to a debt collection agency.
Debt scoring can help save accounts before they go into default. For example, banks and credit unions can better monitor the state of their loans, checking and share draft accounts. They can then better predict which accounts to direct 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 execute more tailored collection strategies, specific to the particular customer, based on the level of difficulty. This again, saves time, money and staffing obligations.
About the Author:
David P. Montana has authored extensively and worked as a business consultant in debt collection agencies services for three decades. David offers much more important tools and resources about debt scoring.
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