Profit per Account in Collections

Profit per Account in Collections

KPI Details

Profit per Account in Collections measures the gross profit (total revenue minus total operating expenses) earned by the Collections function, or agency, in relation to the number of delinquent accounts managed over the same period of time. Relatively low values for this metric can be indicative of 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 increase operating expenses and diminish the company's ability to obtain the amount of money owed to them.

KPI Definition

Gross profit (total revenue minus total operating expenses) earned by the Collections function, or agency, divided by the number of delinquent accounts managed over the same period of time.

KPI Best Practices

• Implement activity-based costing ( A B C) to track the cost to manage each delinquent account
• Comprehensive knowledge of competitors to be able to determine maximum commission rates
• Categorize delinquent accounts to collect payment from higher dollar lower risk accounts first

KPI Calculation Instructions Profit per Account in Collections?

Two numbers are used to calculate this KPI: (1) the gross profit earned by the Collections function, or agency, and (2) the number of delinquent accounts managed over the same period of time. Subtract the operating expenses incurred from the total revenue generated by the company to calculate gross profit. Include accounts at all stages of collections (i.e., early to late stage) in this calculation. Early stage accounts in collections are considered to be accounts that are 30 - 90 days overdue. Late stage accounts in collections are considered to be accounts that are 120+ days overdue.

KPI Formula :

Profit Earned / Number of Accounts in Collections