Collecting in a tough economy using statistical collection scoring technology.(selected topic)

Managing collections cost-effectively has never been more critical than in today's economy. Companies are dealing with resource constraints and more and more accounts are paying slower, leading to more accounts in collections, which produce rising collection costs, and higher DSO and write-offs. Tight capital markets coupled with rising delinquencies have forced those companies that are over extended into merger or in some cases bankruptcy. Those that are going to survive and succeed during this recessionary storm need to focus on maintaining portfolio quality by keeping cash flow steady.

"Corporate cash flow growth is becoming more difficult to sustain as the economy continues to slow down. Average DSO now at 41 days and counting," according to a survey by consulting firm REL. "You are going to have to look at your own efforts internally to improve your liquidity," said Karlo Bustos, an REL financial analyst, in an article from the September 10, 2008 edition of Financial Week.

Change in decision strategy for managing your portfolio is a must. Companies have to adapt to changing times. Mishandling accounts results in high DSOs, late payments and ultimately losses on the portfolio. At the end of the day, losses due to the uncollectability of certain accounts receivable can make or break a company's bottom line. Most companies need to develop better ways to improve their cash flow and reduce losses, which all stems from the improvement of their collection activities.

Information availability and leading edge information technology is a trademark of successful companies. In a tough economy it is even more important to leverage that information and technology to build knowledge. A statistical-based collection scoring solution provides knowledge to weather, and even prosper, during tough times. Those companies that have implemented a knowledge-based decision system as the main component of their collection strategy are realizing a dramatic reduction in DSO, write-offs and operational costs while expending their limited resources and personnel more effectively.

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How Collections Are Typically Managed Today

If your company has one internal collector for hundreds of customers, how does the collector determine which customers they should focus on, what type of treatment should be used for a given customer and when they should apply that treatment?