Sip and-solve-ep-25-manage-receivables-rising-delinquency
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1. The document discusses strategies for maximizing receivables as delinquencies rise due to the pandemic. It recommends prioritizing accounts, assessing needed adjustments, and finalizing a plan to maximize cash flow. 2. Key recommendations include focusing collection efforts on accounts that are most likely to pay slowly but eventually pay based on their credit scores, and accelerating legal action or restricting credit for low-scoring accounts that pose the highest risk of non-payment. 3. Commercial recovery scores can help identify the segments of accounts that are most likely to result in collections, with the top 30% of scores accounting for 72% of potential dollar collections. This allows collection resources to be focused most effectively.
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Sip and-solve-ep-25-manage-receivables-rising-delinquency
- 1. 1 © Experian Sip and Solve How to maximize receivables as delinquencies rise Featuring: John Krickus Senior Product Manager Your picture Andrew Moore Senior Analytical Consultant, Commercial Data Sciences
- 2. 2 © Experian Receivable management issues will grow… exponentially The challenge… • Significant increase in accounts going delinquent, by multiples, in weeks • Resource constraints that do not approach the new level of past due accounts Cash generation is high priority Key questions 1. What projected increase in delinquent accounts are you facing? 2x? 3x? More? 2. What is the cash flow the business is going to require, as cash is now most important? 3. Do you have the resources, people, and tools, to meet significant spikes in delinquent accounts? 4. Given the answers to the above what changes in policies and resources are needed? (and fast) $
- 3. 3 © Experian Developing a receivable treatment plan 1. Prioritize - base strategy 2. Assess - identify needed adjustments (two specific areas) 3. Act- finalize plan and execute Maximize Cash Flow
- 4. 4 © Experian Identify slow pay, BUT WILL PAY Early stage receivables - Immediate cash vs. Maximize cash Maximize cash over time? Focus on slow pay, but will pay accounts (in green) low risk for business failure, but will pay slow. Highest scored accounts become second target. Need immediate cash? Focus on the best scoring accounts (in yellow) for both scores Managing Early-Mid Stage Delinquency Intelliscore Plus V2 (or SBFE/SBCS) Low Score High Score Financial Stability Risk Score High Score Best group for focusing resources to generate payments Pay slow, but will pay Best group for self-cure Lowest risk of delinquency & failure This category is second target Low Score Least resources Significant risk for non-payment Negotiate payment terms Caution with credit lines Small set of accounts Good payment risk but significant default risk Special circumstances, potential legal filings, other?
- 5. 5 © Experian Implementing a Score Based Collection Strategy • Application across multiple business functions • 1st / 3rd Collections and Receivables Management • Key Themes • Maximizing Recoverable Yield / Managing Dollars at Risk • Applicable to all levels of an organization • CFO to Collections Manager Benefits: • Reduce costs: Rank order treatments in terms of collection costs • Optimize collection efforts: Apply appropriate treatment strategy prior to returning record per the client deadline or warehousing the placement to revisit at a later date • Accelerate legal action, credit line freeze: For low scoring accounts accelerate collection / legal actions
- 6. 6 © Experian Late stage receivables- Commercial Recovery Score Top 30% captures 72% of potential dollar collections Chart of collection performance by numbers and dollars 26% 45% 58% 46% 62% 72% 0% 10% 20% 30% 40% 50% 60% 70% 80% Top 10% Top 20% Top 30% Commercial Recovery Score Recovery # Recovery $$$
- 7. 7 © Experian Experian Commercial Recovery Score – Analytical Insights Mail / Email / Text reminders, Auto-Dialer, Low cost contact options; likely to pay Phone calls, likely to pay Phone calls, urgent past due notices, more calls, likely slow pay Urgent phone calls, urgent demand letters, attorneys/legal action Potential Treatment StrategyCreate segments using the Commercial Recovery Score to more accurately and efficiently apply Treatment Strategies Isolate lowest % of placement dollars to take final action and focus resources else where Commercial Recovery Score Score Range % of Total Placement Count % of Total Placement $ Avg. Place 756-825 39.90% 58.40% $10,500 730-754 713-729 695-712 677-694 29.40% 24.10% $5,900.00665-676 653-664 635-652 20.80% 13.30% $4,600.00 616-634 469-614 10.00% 4.20% $3,000 Total 100.00% 100.00% $7,100.00 Balance the Probability of Collection with the Placement Amount to Maximize Recoverable Yield; as scores decrease you see fewer dollar’s at risk
- 8. 8 © Experian 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 489 555 572 578 589 598 602 606 611 615 620 624 629 633 637 641 645 649 653 657 661 665 669 673 677 681 685 689 693 697 701 705 709 713 717 721 725 729 733 737 741 745 749 753 757 761 765 769 773 777 781 785 789 793 797 801 805 809 813 817 821 825 829 833 837 841 845 849 Commercial Recovery Score Distribution Sum of COLLECTION_BALANCE Sum of Place. Cnt. Low Probability of Collection High Probability of Collection Clean Score distribution, Largest % of placement $ OPPORTUNITY, material $’s at Risk – FOCUS area Minimal $’s at risk, low probability of collection, FINAL ACTION Placement Dollars Percent of Total Placements
- 9. 9 © Experian Consolidated Skip Tracing Information is a value-add to the Commercial Recovery Score offering • Experian is aggregating multiple data sources into one file output; creating efficiencies in gathering data Skip Tracing Information Includes: • Up to 5 Officer Contacts within the organization • Up to 10 Additional Locations with full address and additional unique phone numbers Production Test Results: • The Commercial Recovery Score batch output provided 30% additional NEW contact information • 60% of the additional contact information resulted in a “good net new contact” • Delivered positive ROI • Client then provided full portfolio for batch “scoring” Commercial Recovery Score – Skip Tracing – Value Add
- 10. 10 © Experian Key takeaways • Use scores and analytics to focus your resources on accounts most likely to pay • Commercial Recovery Score will assess the potential for payments on the most severely delinquent accounts • Additional phone numbers and addresses will help track down accounts Have questions or want to learn more about maximizing receivables? • Email us: CommercialDataScienceRequests@experian.com Upcoming Sip and Solves - • Join the list to stay in the loop: bit.ly/sip-and-solve Thank you!