Eyes on the prize: the seven golden rules of goals.(selected topic)

Knowing how to set collection goals is one of a credit or collection manager's most important competencies. At their best, goals provide your collectors with a sense of achievement while motivating them to perform better every month. At their worst, they're a discouragement even to your top collectors.

Creating goals shouldn't be guesswork. Base them on a thorough understanding of your customers, your inventory and your collectors. You'll apply all of this expertise to create--and then exceed--expectations. This article covers the seven golden rules of goals, giving the credit professional both the math and the motive behind the benchmark.

1. Know What to Measure

For many collection professionals, it's a department's recovery figures that are most directly linked to its effectiveness, at least in the short-term. Good monthly recovery figures are essential to profitability and to cash flow. Therefore, collectors are always held to a specific revenue goal: a fee or gross dollar amount representing a minimum achievement for a given collector on a given file.

But there's more to consider. Many departments regard a liquidation figure as equally important. This is a percentage of dollars collected against dollars placed, or against dollars in an existing inventory. Rapid liquidation keeps DSO down and collection agency clients happy and confident. Measuring revenue without considering liquidation can give a misleading result. Creditors may miss opportunities to adjust their credit practices to minimize DSO; collection agencies may fail to perform as well as possible across all the clients they serve.

For the latter, a bad reputation spreads much more quickly than a good one. Poor liquidation performance, even on a handful of clients, can mean serious opportunity loss in the long term. Hold your team to a reasonable liquidation goal for all your clients as well as a profitable revenue goal for their files overall.

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