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KPIs are essential for debt collection because they provide a way to measure the performance of the collections team and to identify areas where improvement is needed. By tracking KPIs over time, collections departments can see how their performance is changing and can make adjustments to their strategies and processes accordingly.
Days Sales Outstanding (DSO): This metric measures the average number of days it takes a company to collect payment from its customers. A lower DSO indicates that the company is collecting payments more quickly, which can improve cash flow and reduce bad debt losses.
Collection Effectiveness Index (CEI): This metric measures the percentage of outstanding debt that is collected within a given period of time. A higher CEI indicates that the collections team is more effective in recovering debt.
Promise to Pay (PTP) rate: This metric measures the percentage of customers who make a promise to pay after being contacted by the collections team. A higher PTP rate indicates that the collections team is more effective in persuading customers to make payments.
Profit per Account (PPA): This metric measures the amount of profit that the company generates from each customer account. A higher PPA indicates that the collections team is more effective in collecting debt without incurring excessive costs.
Average amount collected per agent: This metric measures the average amount of debt that each collections agent collects each month. A higher average amount collected per agent indicates that the collections team is more productive.
These KPIs can be used to track the performance of the collections department over time and to identify areas where improvement is needed. For example, if the DSO is increasing, the collections team may need to focus on collecting payments from customers more quickly. Or, if the PTP rate is decreasing, the collections team may need to improve its negotiation skills.
In addition to these five KPIs, collections departments may also track other metrics, such as:
Cost per collection: This metric measures the average cost of collecting a debt.
Bad debt write-offs: This metric measures the amount of debt that is written off as uncollectible.
Customer satisfaction: This metric measures how satisfied customers are with the collections process.
By tracking a variety of KPIs, collections departments can get a comprehensive view of their performance and identify areas where they can improve.
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