The document discusses how collection agencies are increasingly charging lower rates to win business, making it difficult for agencies to staff effectively and achieve the best returns. It argues creditors should prioritize the "net back" return over the rate, and considers an example where paying agencies 5% more could result in a 5% higher recovery rate and 17% higher "net back" return for the creditor. The author contends the best collectors are necessary to achieve the highest returns, and the lowest bidder is not always the best option for creditors.
Advocates Letter Format Shor Tpresentation PrintableThomas Tysl
Partner with Advocates For Savings to cut costs through analyzing expenses like worker's compensation insurance, taxes, credit card processing fees, and more. Their experts can find savings opportunities across various business areas and connect you with relevant subsidy and stimulus programs. Their services aim to improve your bottom line at no risk, as clients only pay a percentage of recovered savings or overpayments.
Graydon's Tips on how to improve your business credit rating. By following a few simple tips, you can improve your business credit report, give more confidence to your suppliers, achieve better credit terms, trade more and achieve better business image.
The document discusses strategies for optimizing accounts receivable (A/R) management. It outlines benefits like reducing bad debt risks by 20-50% and generating 10-40% of receivables in cash. Best practices include having senior management commitment, accurate order fulfillment, consistent collection processes, and using metrics and technology. A case study shows how a $1.5B manufacturer improved A/R management, releasing $45M in cash and reducing DSO from 47 to 36 days.
How to Use Tax Returns for Global Cash Flow with Multiple Pass-Through EntitiesLibby Bierman
This webinar discusses analyzing tax returns to determine global cash flow for borrowers with multiple pass-through entities. It provides examples of calculating cash flow at the entity, owner, and global levels using tax returns such as 1120S, 1065, and 1040. The webinar addresses questions about which tax returns to require from owners and guarantors and how to estimate family living expenses when determining debt coverage ratios. Participants are polled on their approaches to debt coverage ratios, cash flow analysis, and requirements for guarantees.
Advocates Letter Format Shor Tpresentation PrintableThomas Tysl
Partner with Advocates For Savings to cut costs through analyzing expenses like worker's compensation insurance, taxes, credit card processing fees, and more. Their experts can find savings opportunities across various business areas and connect you with relevant subsidy and stimulus programs. Their services aim to improve your bottom line at no risk, as clients only pay a percentage of recovered savings or overpayments.
Graydon's Tips on how to improve your business credit rating. By following a few simple tips, you can improve your business credit report, give more confidence to your suppliers, achieve better credit terms, trade more and achieve better business image.
The document discusses strategies for optimizing accounts receivable (A/R) management. It outlines benefits like reducing bad debt risks by 20-50% and generating 10-40% of receivables in cash. Best practices include having senior management commitment, accurate order fulfillment, consistent collection processes, and using metrics and technology. A case study shows how a $1.5B manufacturer improved A/R management, releasing $45M in cash and reducing DSO from 47 to 36 days.
How to Use Tax Returns for Global Cash Flow with Multiple Pass-Through EntitiesLibby Bierman
This webinar discusses analyzing tax returns to determine global cash flow for borrowers with multiple pass-through entities. It provides examples of calculating cash flow at the entity, owner, and global levels using tax returns such as 1120S, 1065, and 1040. The webinar addresses questions about which tax returns to require from owners and guarantors and how to estimate family living expenses when determining debt coverage ratios. Participants are polled on their approaches to debt coverage ratios, cash flow analysis, and requirements for guarantees.
This newsletter provides tips to help improve your chances of getting a home loan when mortgage lending is tight. It recommends checking your credit report and score for inaccuracies, paying down consumer debt to improve your credit and debt-to-income ratio, taking a temporary second job to increase income and savings, and building a down payment fund of at least 20% for the best loan terms. It also discusses strategies for retirement savings in a declining market such as reviewing your plan, converting traditional IRAs to Roth IRAs if eligible, and continuing contributions if possible. For those who have lost their job, it provides advice on evaluating severance packages, updating finances and resumes, utilizing unemployment benefits, telling your support network, and being aggressive in
A small business guide on Merchant Cash Advance. What is a merchant cash advance, how it works, strategic uses, pitfalls to avoid, and how to find a reputable merchant cash advance company.
The document is a presentation by Transworld Systems Inc (TSI) promoting their accounts receivable management and debt collection services. TSI claims they can collect debts at a fraction of the usual cost, with over a 50% recovery rate compared to the national average of 20%. They emphasize their nationwide network of offices and ability to match debtors to local offices, as well as their online reporting and management tools. The presentation encourages businesses to calculate their expected debt volume to determine the appropriate size of TSI's collection system for their needs.
Transworld Systems Inc. is a debt collection agency that has recovered over $2.4 billion for its customers since 1970. It recovers debts at a rate that is over 4 times the industry average, with an average cost of only $10 per account. The agency has over 9,000 associates working out of 100 offices nationwide. It offers a full suite of debt collection and recovery services for businesses.
Transworld Systems Inc. is a debt collection agency that has been in business since 1970. They claim to recover debts for an average of $10 per account, which is a higher success rate than the industry average. They have over 130 offices nationwide for local presence during the collection process. Their method involves using the client's staff as advocates for patients to pay directly to the client, while Transworld handles further collection efforts, allowing the client to double their investment if recovery rates are less than promised.
AmCorp Management is an expense recovery firm that has been in business for 19 years. It helps businesses locate billing errors and other expenses they have paid incorrectly in order to recover millions of dollars for its clients each year. AmCorp is seeking sales representatives to license with the company in order to help businesses audit their expenses and recover revenue. Licensing with AmCorp costs between $17,995-$29,995 but representatives can recoup much of the cost through commissions on revenue recovered for clients.
Bill Lee has nearly 40 years of experience in the construction supply industry. He writes here about being ready for growth and the best ways to manage growth and risk.
Medical Presentation With Insurance 3 2008[1]jeff dorsey
Transworld has consistently recovered more than the national average for collections agencies, recovering over $700 million last year for more than 60,000 clients. They use a three phase approach that begins with optimizing in-house collection efforts, followed by using Transworld for in-house collections, and then conventional collection methods if needed. Transworld guarantees accounts will be contacted every 10-14 days and has an average recovery rate of 56% at a cost of 7 cents per dollar recovered.
This document provides an overview of Transworld Systems Inc.'s cash flow management services. It discusses their experience helping over 200,000 clients resolve $6 billion in accounts receivable using low fixed-fee pricing. Their approach involves transitioning accounts from initial statements to collection demands in order to create urgency and increase recovery rates for clients.
Answer both questions (50 points each total = 100 points). Pl.docxrossskuddershamus
Answer both questions (50 points each: total = 100 points). Please show all work, including calculator keystrokes or Excel functions for time value of money calculations, so the maximum partial credit may be given.
1.
The president of Receding Airlines has asked you to calculate the company's cost of capital. To start, you have gathered the following information:
(1)
RecedingAir has the following securities outstanding:
· $1,000 face value, 8% annual coupon bonds with 15 years remaining to maturity and a current market price of $1,150.
· $100 par value preferred stock that pays an 11% annual dividend and has a current market price of $92.
· Common stock with a current market price of $50/share. Investors expect the next annual dividend to be $4.00 and to grow after that at a constant rate of 7% per year into the foreseeable future.
(2)
If RecedingAir were to issue new securities today:
· New bonds would pay interest annually, have a 15-year life, and incur a flotation cost of 3%.
· A new issue of preferred stock would pay annual dividends and incur flotation costs of 6%
· A new issue of common stock would incur flotation costs of 8%.
(3)
RecedingAir’s income is taxed at a 35% marginal rate.
(4)
RecedingAir’s target capital structure is 35% long-term debt, 15% preferred stock, and 50% common equity.
(5)
RecedingAir forecasts it will retain $25,000,000 of earnings in the coming year.
Required
a.
What is the required rate of return of RecedingAir’s bondholders?
b.
What is RecedingAir’s cost of debt?
c.
What is the required rate of return of RecedingAir’s preferred stockholders?
d.
What is RecedingAir’s cost of preferred stock financing?
e.
What is the required rate of return of RecedingAir’s common stockholders?
f.
What is RecedingAir’s cost of retained earnings financing?
g.
What is RecedingAir’s cost of a new common stock issue?
h.
What is RecedingAir’s weighted-average cost of capital (WACC) for its first dollar of new financing?
i.
How much total new financing can RecedingAir raise before its supply of new retained earnings financing is exhausted and there is a break in the cost of capital schedule?
j.
What would RecedingAir’s weighted-average cost of capital (WACC) become should it require more financing this year than the amount you calculated in part h, above?
2.
You have just been hired by Edifice Wrecks, Inc. (the demolition company) to evaluate a proposal to purchase a new solar-powered, web-enabled building smasher to replace an existing hand-powered smasher. You have discovered that:
· The old hand-powered smasher was purchased 5 years ago for $90,000 and is being depreciated for tax purposes using the straight-line method over an 8-year life to a $10,000 salvage value. The old smasher’s salvage value remains $10,000, however, it could be sold today for $25,000. $15,000 is invested in working capital in support of this smasher.
· The new smasher would cost $125,000 and be depreciated for .
This document provides an overview of services from Transworld Systems Inc. to help businesses manage cash flow by improving accounts receivable collections. The services include automated follow-up with customers to collect on overdue invoices using increasingly urgent messages. Fees range from $10-30 per account and clients report collection rates over 50% and savings of 30-70% compared to traditional collection agencies.
The Hidden Impact of Your Payment Processor May Be Killing Your BusinessRussell Street Report
This document discusses how hidden fees from payment processors can negatively impact businesses. It outlines various fees like late fees, service fees, management fees, and more that businesses may be charged without realizing. The document urges businesses to carefully understand the basics of payment processing and ensure they are not being overcharged for things like transaction fees, account updates, declined payments, and cash flow deposits. Choosing the right payment processor is important to protect a business's reputation and finances.
Medical Presentation With Insurance 3 2008[1]jeff dorsey
Transworld has consistently recovered funds at a higher rate than the national collections industry average. Last year they recovered over $700 million for more than 60,000 clients. Their three phase approach aims to optimize in-house collection efforts first before moving to a fixed fee third party approach, and finally conventional contingency collection methods if needed. The document provides details on Transworld's collection processes and rates.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then provides funds to the business within 24 hours while waiting for payment from customers. Almost any commercial business with solid customers and a need for improved cash flow qualifies for their services.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then pays the business upfront, usually within 24 hours, and waits for payment from the customer. There are no long-term contracts or minimum fees involved. Brokers can also earn commissions by referring new clients to Charter Capital.
During 2011, JPMorgan Chase earned record profits of $19 billion, up 9% from 2010. However, losses from mortgages and mortgage-related issues prevented the firm from reaching its full earnings potential of $23-24 billion. Looking ahead, the firm believes its earnings power will grow over time, though it always expects some volatility. The firm is focused on building long-term shareholder value by prioritizing customers, employees, communities and responsible business practices, not just short-term profits. It aims to fulfill its important role in society by providing capital, credit and services that benefit clients and communities.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then pays the business upfront, usually within 24 hours, and waits for payment from the customer. There are no long-term contracts or hidden fees involved with their services.
Al Noshirvani - Payment Processing Hidden FeesAl Noshirvani
This document discusses how payment processors can charge hidden fees that negatively impact businesses. It outlines several types of fees processors may charge, such as per transaction fees over the actual interchange rate, fees for account updates, multiple resubmission fees for declined payments, and delays in depositing funds. The document advises businesses to carefully audit their payment processing statements to avoid unnecessary fees and ensure their processor deposits funds within 1-2 days of billing. Choosing the right processor is important to protect a business's reputation and cash flow.
This document provides an overview of Transworld Systems Inc.'s (TSI) three-phase approach to debt collection. Phase I involves optimizing in-house collection efforts for the first 60 days. Phase II involves TSI's "Greenflag" collection services making diplomatic contact with debtors from days 60-100 at a lower cost than traditional agencies. Phase III may involve legal action if needed. TSI claims to recover more than traditional agencies through earlier intervention and a lower fixed fee structure versus percentage-based fees. The document outlines TSI's services and provides client testimonials praising their results.
Transworld Systems Power Point PresentationTomFenner
Shows business owners how to recover more money from accounts receivables than from conventional collections, at a fraction of the cost of conventional collections.
The document summarizes Access Receivables Management, a commercial debt collection agency. It highlights their artificial intelligence driven collection efforts, expert domestic collectors, multi-channel communication approaches, and full service legal department. It then provides their flexible fee structure based on account balances and days outstanding, with no retainers, long term contracts, or volume commitments. The document promotes a 6-month trial period with them to demonstrate their superior results over other vendors.
Did you know that 35 states now require commercial collection agencies to be licensed and bonded to collect in their state regardless of where they are domiciled?
ACCESS is fully compliant
This newsletter provides tips to help improve your chances of getting a home loan when mortgage lending is tight. It recommends checking your credit report and score for inaccuracies, paying down consumer debt to improve your credit and debt-to-income ratio, taking a temporary second job to increase income and savings, and building a down payment fund of at least 20% for the best loan terms. It also discusses strategies for retirement savings in a declining market such as reviewing your plan, converting traditional IRAs to Roth IRAs if eligible, and continuing contributions if possible. For those who have lost their job, it provides advice on evaluating severance packages, updating finances and resumes, utilizing unemployment benefits, telling your support network, and being aggressive in
A small business guide on Merchant Cash Advance. What is a merchant cash advance, how it works, strategic uses, pitfalls to avoid, and how to find a reputable merchant cash advance company.
The document is a presentation by Transworld Systems Inc (TSI) promoting their accounts receivable management and debt collection services. TSI claims they can collect debts at a fraction of the usual cost, with over a 50% recovery rate compared to the national average of 20%. They emphasize their nationwide network of offices and ability to match debtors to local offices, as well as their online reporting and management tools. The presentation encourages businesses to calculate their expected debt volume to determine the appropriate size of TSI's collection system for their needs.
Transworld Systems Inc. is a debt collection agency that has recovered over $2.4 billion for its customers since 1970. It recovers debts at a rate that is over 4 times the industry average, with an average cost of only $10 per account. The agency has over 9,000 associates working out of 100 offices nationwide. It offers a full suite of debt collection and recovery services for businesses.
Transworld Systems Inc. is a debt collection agency that has been in business since 1970. They claim to recover debts for an average of $10 per account, which is a higher success rate than the industry average. They have over 130 offices nationwide for local presence during the collection process. Their method involves using the client's staff as advocates for patients to pay directly to the client, while Transworld handles further collection efforts, allowing the client to double their investment if recovery rates are less than promised.
AmCorp Management is an expense recovery firm that has been in business for 19 years. It helps businesses locate billing errors and other expenses they have paid incorrectly in order to recover millions of dollars for its clients each year. AmCorp is seeking sales representatives to license with the company in order to help businesses audit their expenses and recover revenue. Licensing with AmCorp costs between $17,995-$29,995 but representatives can recoup much of the cost through commissions on revenue recovered for clients.
Bill Lee has nearly 40 years of experience in the construction supply industry. He writes here about being ready for growth and the best ways to manage growth and risk.
Medical Presentation With Insurance 3 2008[1]jeff dorsey
Transworld has consistently recovered more than the national average for collections agencies, recovering over $700 million last year for more than 60,000 clients. They use a three phase approach that begins with optimizing in-house collection efforts, followed by using Transworld for in-house collections, and then conventional collection methods if needed. Transworld guarantees accounts will be contacted every 10-14 days and has an average recovery rate of 56% at a cost of 7 cents per dollar recovered.
This document provides an overview of Transworld Systems Inc.'s cash flow management services. It discusses their experience helping over 200,000 clients resolve $6 billion in accounts receivable using low fixed-fee pricing. Their approach involves transitioning accounts from initial statements to collection demands in order to create urgency and increase recovery rates for clients.
Answer both questions (50 points each total = 100 points). Pl.docxrossskuddershamus
Answer both questions (50 points each: total = 100 points). Please show all work, including calculator keystrokes or Excel functions for time value of money calculations, so the maximum partial credit may be given.
1.
The president of Receding Airlines has asked you to calculate the company's cost of capital. To start, you have gathered the following information:
(1)
RecedingAir has the following securities outstanding:
· $1,000 face value, 8% annual coupon bonds with 15 years remaining to maturity and a current market price of $1,150.
· $100 par value preferred stock that pays an 11% annual dividend and has a current market price of $92.
· Common stock with a current market price of $50/share. Investors expect the next annual dividend to be $4.00 and to grow after that at a constant rate of 7% per year into the foreseeable future.
(2)
If RecedingAir were to issue new securities today:
· New bonds would pay interest annually, have a 15-year life, and incur a flotation cost of 3%.
· A new issue of preferred stock would pay annual dividends and incur flotation costs of 6%
· A new issue of common stock would incur flotation costs of 8%.
(3)
RecedingAir’s income is taxed at a 35% marginal rate.
(4)
RecedingAir’s target capital structure is 35% long-term debt, 15% preferred stock, and 50% common equity.
(5)
RecedingAir forecasts it will retain $25,000,000 of earnings in the coming year.
Required
a.
What is the required rate of return of RecedingAir’s bondholders?
b.
What is RecedingAir’s cost of debt?
c.
What is the required rate of return of RecedingAir’s preferred stockholders?
d.
What is RecedingAir’s cost of preferred stock financing?
e.
What is the required rate of return of RecedingAir’s common stockholders?
f.
What is RecedingAir’s cost of retained earnings financing?
g.
What is RecedingAir’s cost of a new common stock issue?
h.
What is RecedingAir’s weighted-average cost of capital (WACC) for its first dollar of new financing?
i.
How much total new financing can RecedingAir raise before its supply of new retained earnings financing is exhausted and there is a break in the cost of capital schedule?
j.
What would RecedingAir’s weighted-average cost of capital (WACC) become should it require more financing this year than the amount you calculated in part h, above?
2.
You have just been hired by Edifice Wrecks, Inc. (the demolition company) to evaluate a proposal to purchase a new solar-powered, web-enabled building smasher to replace an existing hand-powered smasher. You have discovered that:
· The old hand-powered smasher was purchased 5 years ago for $90,000 and is being depreciated for tax purposes using the straight-line method over an 8-year life to a $10,000 salvage value. The old smasher’s salvage value remains $10,000, however, it could be sold today for $25,000. $15,000 is invested in working capital in support of this smasher.
· The new smasher would cost $125,000 and be depreciated for .
This document provides an overview of services from Transworld Systems Inc. to help businesses manage cash flow by improving accounts receivable collections. The services include automated follow-up with customers to collect on overdue invoices using increasingly urgent messages. Fees range from $10-30 per account and clients report collection rates over 50% and savings of 30-70% compared to traditional collection agencies.
The Hidden Impact of Your Payment Processor May Be Killing Your BusinessRussell Street Report
This document discusses how hidden fees from payment processors can negatively impact businesses. It outlines various fees like late fees, service fees, management fees, and more that businesses may be charged without realizing. The document urges businesses to carefully understand the basics of payment processing and ensure they are not being overcharged for things like transaction fees, account updates, declined payments, and cash flow deposits. Choosing the right payment processor is important to protect a business's reputation and finances.
Medical Presentation With Insurance 3 2008[1]jeff dorsey
Transworld has consistently recovered funds at a higher rate than the national collections industry average. Last year they recovered over $700 million for more than 60,000 clients. Their three phase approach aims to optimize in-house collection efforts first before moving to a fixed fee third party approach, and finally conventional contingency collection methods if needed. The document provides details on Transworld's collection processes and rates.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then provides funds to the business within 24 hours while waiting for payment from customers. Almost any commercial business with solid customers and a need for improved cash flow qualifies for their services.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then pays the business upfront, usually within 24 hours, and waits for payment from the customer. There are no long-term contracts or minimum fees involved. Brokers can also earn commissions by referring new clients to Charter Capital.
During 2011, JPMorgan Chase earned record profits of $19 billion, up 9% from 2010. However, losses from mortgages and mortgage-related issues prevented the firm from reaching its full earnings potential of $23-24 billion. Looking ahead, the firm believes its earnings power will grow over time, though it always expects some volatility. The firm is focused on building long-term shareholder value by prioritizing customers, employees, communities and responsible business practices, not just short-term profits. It aims to fulfill its important role in society by providing capital, credit and services that benefit clients and communities.
Charter Capital provides invoice factoring services to businesses to improve their cash flow. They have over 40 years of combined experience in factoring and are based in Houston, Texas with a national reach. The factoring process involves a business submitting invoices to Charter Capital, who then pays the business upfront, usually within 24 hours, and waits for payment from the customer. There are no long-term contracts or hidden fees involved with their services.
Al Noshirvani - Payment Processing Hidden FeesAl Noshirvani
This document discusses how payment processors can charge hidden fees that negatively impact businesses. It outlines several types of fees processors may charge, such as per transaction fees over the actual interchange rate, fees for account updates, multiple resubmission fees for declined payments, and delays in depositing funds. The document advises businesses to carefully audit their payment processing statements to avoid unnecessary fees and ensure their processor deposits funds within 1-2 days of billing. Choosing the right processor is important to protect a business's reputation and cash flow.
This document provides an overview of Transworld Systems Inc.'s (TSI) three-phase approach to debt collection. Phase I involves optimizing in-house collection efforts for the first 60 days. Phase II involves TSI's "Greenflag" collection services making diplomatic contact with debtors from days 60-100 at a lower cost than traditional agencies. Phase III may involve legal action if needed. TSI claims to recover more than traditional agencies through earlier intervention and a lower fixed fee structure versus percentage-based fees. The document outlines TSI's services and provides client testimonials praising their results.
Transworld Systems Power Point PresentationTomFenner
Shows business owners how to recover more money from accounts receivables than from conventional collections, at a fraction of the cost of conventional collections.
The document summarizes Access Receivables Management, a commercial debt collection agency. It highlights their artificial intelligence driven collection efforts, expert domestic collectors, multi-channel communication approaches, and full service legal department. It then provides their flexible fee structure based on account balances and days outstanding, with no retainers, long term contracts, or volume commitments. The document promotes a 6-month trial period with them to demonstrate their superior results over other vendors.
Did you know that 35 states now require commercial collection agencies to be licensed and bonded to collect in their state regardless of where they are domiciled?
ACCESS is fully compliant
The International Commercial Collectors Association (IACC) is affiliated with ACA International and has been dedicated to educating and ensuring compliance of commercial collection agencies since 1970. The IACC has a more stringent certification program than the CLLA-CCAA and requires recertification every two years. It has more collection agency members but fewer certified members than the CLLA. The IACC certification requirements include things like minimum bonding, separate trust accounts, disaster recovery procedures, and financial statement reviews.
Nice People Collect More is a compliant debt collection solution that incorporates, debtor education, a positive approach and a self resolution option. Access is a nationally licensed firm specializing in higher recoveries without complaints.
The document shows the relationship between the age of an overdue account and the chance of recovery based on statistics from the Chamber of Commerce. The older an account becomes overdue, the lower the chance of recovery, with accounts over 360 days old having only a 12% chance of being recovered.
This presentation has been done in person at numerous colleges, universities and corporations. It's a simple and easy training document for internal debt collectors.
This document summarizes a presentation given at the 2010 ACA International Convention about changing communication habits and the evolution of technologies that demand faster response times. It discusses how payment habits have changed with more electronic payments and less check usage. It also describes a case study of a company that implemented a virtual collections agent on a website to provide debtors a self-service option to make payments online at any time. The virtual agent was modeled after the company's best live collectors and has increased online payments and recoveries while lowering operating costs.
1. ATTENTION CREDITORS: By Tom Gillespie
What Ever Happened To “Net Back” Returns
Over the past 25 years the collection The goal, in the end, is to get the best business.
industry has undergone significant change. The possible “net back” return. Prime Example
most noticeable transformation: the concept of Once agencies know you are willing to pay In this scenario, by paying the agency 5%
working every account to achieve a maximum for quality, they will make every effort to more, they return 5% more, and the creditor
return. impress and get you the highest possible increases its “net back” by 17%.
While the goal of most collection agencies recovery rate. Ask potential and/or current
is to achieve the best possible return for every agencies to supply a work plan and staffing Current New
client, it is becoming increasingly difficult to proposal based on performance (i.e. they are Recoveries Recoveries
achieve the best returns in the current paid a higher percentage if they return a higher Average Balance $1,500.00 $1,500.00
atmosphere of rate-cutting. percentage, but need to commit more resources
On the surface, it would seem creditors to your file); and set your base recovery rate at Recovery Rate 20% 25%
today are getting a great deal. With commercial the current 12-month return (in this case 20%). Amount Collected $300.00 $375.00
and consumer rates for collections falling as At the end of the day if you pay the
agencies battle for business, rates are becoming agencies 5% more and they return 5% more Fee Percent Charged 20% 25%
significantly lower than those traditionally you will be the big winner.
Unit Yield $60.00 $93.75
charged in the collection industry. Predictive Historical Prospective
dialing, IVR technology, scoring, and lower Back in the early 1980’s, The JC Penney “Net Back” to You $240.00 $281.25
long distance rates have enabled collection Company was faced with a problem. As a
agencies both large and small to compete with national creditor, they typically utilized large,
the largest firms on a national basis. national agencies. However, these agencies had Final Analysis
Fundamentally, however, it is a good other, larger, national clients including All the technology in the world will not get
collector on the other end of the phone that is American Express and Citibank, among others. a company the best possible return unless the
necessary to bring home the money. But good The JC Penney paper had a lower average person on the other end of the phone is a highly
collectors cost money – and that is where the balance and was tougher paper to collect. The trained and effective collector.
biggest challenge lies for collection agencies key to success for large national creditors is to Every agency has them. Why not make sure
today. Rates are so low, it is all but impossible get their agencies’ best people working their they are working your accounts.
for agencies to staff their business effectively files.
enough to get the best possible return for all Knowing this, JC Penney paid its agencies a About the Author: Tom Gillespie and his wife
clients. 40% rate across the board. The net result — Debra are the owners of ACCESS Receivables
The competition in our business is so great JC Penney got the best collectors, had lower Management in Towson, Maryland. Prior to
that many agencies will sometimes charge agency turnover, and consistently higher ACCESS, Tom was a principal at National
whatever they can get. In fact, one large recoveries. Credit Management Corporation from 1986-
government contract is commanding a 4.5% The reason? 1997, and Vice-President of Sales and
rate. And the client only requires one collection Agencies could afford to put more effort Marketing for Financial Collection Agencies
attempt per month. into every account, and coveted the JC Penney (FCA) from 1980-1986.
They call that a collection program?
When selecting an agency, it is vital to
decide what is more important to your Why the lowest bidder isn’t always the best
business, the “net back” return, or the rate.
Analyze Your Business In a recent conversation with a credit grantor who placed their business with several agencies,
In order to receive the highest “Net Back” they revealed they were dropping all but two agencies because those two agencies had agreed to
return, you first have to figure out how much charge a rate of sixteen percent.
your business is worth. Use the following The average balance of the client’s accounts was $200.00. Their top agency’s recovery rate
was 38% and charged a respectable 27% fee; while the two agencies they were retaining were
example to analyze your business:
averaging a recovery rate of 20%.
The creditor seemed very excited about the low Agency Agency
Average Balance $1,500.00 rate, adding to our conversation, “They do every- One Two
Current Recovery Rate 20% thing for this price including in-depth skip tracing
Average $200.00 $200.00
and litigation.”
Amount Collected per Account $300.00 Balance
Although well intentioned, these agencies could
Agency Fee Percentage 20% not possibly give the creditor a great “net back”
Recovery Rate 38% 20%
return on accounts at that rate, because the rate
Agency Unit Yield (Fee) $60.00
would not support any kind of real effort. Amount $76.00 $40.00
Net Back to You $240.00 After looking at the math (see table) the client Collected
would be receiving a forty-percent higher return if
they paid a higher fee ($55.48 vs. $33.60). And, Fee Percent 27% 16%
In this scenario, the agency has a $60.00 even if an agency off-shores its accounts, how Charged
unit yield, which means it has a good margin many phone calls, letters, and skip tracing attempts
with which to provide a high level of can they provide if they only earn $6.40 per account Unit Yield $20.52 $6.40
experienced collection work, along with placed?
in-depth skip tracing.