Collections Liquidation Rate

Collections Liquidation Rate

KPI Details

Collections Liquidation Rate measures the dollar amount successfully collected by the Collections function in relation to the total dollar value (i.e., the sum of account balances of new accounts in Collections) of new accounts in Collections (new business) over the same period of time. A relatively low value for this metric is typically related to a few common factors: highly manual collection processes (i.e., manual delivery of late payment notifications, etc.), inefficient call scripts and call handling policies, poor customer contact tracking and management (i.e., tracking of customer communications and contact information), an increase in payment disputes (can be due to product or service errors, customer dissatisfaction or undelivered products or services), and sub-par collections employee training and performance. Each of these factors can lead to increased error rates, longer cycle times and higher charge-off rates which can vastly diminish the company's ability to obtain the amount of money owed to them.

KPI Definition

The dollar amount successfully collected by the Collections function divided by the total dollar value (i.e., the sum of account balances of new accounts in Collections) of new accounts in Collections (new business) over the same period of time, as a percentage.

KPI Best Practices

• Determine payment options that are appropriate for debtor to encourage future payment (lump sum, recurring payments, etc.)
• Report payment of outstanding debts to credit bureaus as quickly as possible to incentivize payment
• Adequately staff Collections function to handle new accounts

KPI Calculation Instructions Collections Liquidation Rate?

Two numbers are used to calculate this KPI: (1) the dollar amount successfully collected by the Collections function, and (2) the total dollar value (i.e., the sum of account balances of new accounts in Collections) of new accounts in Collections (new business) over the same period of time. Collections should be defined as successful when a delinquent customer actually pays/settles the payment(s) owed. Only include accounts in the early stages of collections (i.e., accounts that are 30-90 days past due) in the denominator of this calculation.

KPI Formula :

(Dollar Amount Collected / Total Dollar Value of New Accounts in Collections) * 100