The number one indicator of collectability, whether RETAIL or COMMERCIAL debt, is AGE.

“One of the strongest factors in determining the collectability of a debt is the timetable for turning an account over to a collection agency. Generally, the rule has been "the sooner, the better." When a loan is 90 days overdue, a 75 percent chance of collecting exists, but the odds fall .5 percent with each passing day. By the time a loan is 180 days or six months past due, the chance for recovery has dropped to 30 percent. After a year, it is less than 10 percent.”*

The number two indicator for RETAIL debt is the credit report.  Credit reports are filled with factual payment and credit history but it is the story behind the facts that matter most.  Is the debtor a habitual non-payor or are they in crisis mode for some reason?  Are they homeowners or apartment dwellers?  Are they living off their credit cards?  What are the pattern of inquiries?  All these tell tale signs indicate to a skilled collector the state of mind of the debtor.  This assessment is critical to evaluating the potential for recovery as well as identifying the “hot buttons” of the debtor. 

The number three indicator for RETAIL debt is Homeownership.  If the debtor has a home then they have something to lose and will be more inclined to pay as opposed to a transient apartment dweller.

The number two indicator for COMMERCIAL debt is whether the business is currently active and engaging in business activities.  Sometimes the business is no longer active but there are outstanding receivables.  In this case the debtor company could still be sued and the receivables executed upon.  Further, if the creditor has a personal guarantee then the state of the business is less important because there is another party to pursue.

The number three indicator for COMMERCIAL debt is financial stability.  An active corporation engaging in business might appear to be in good shape but upon review of financials they could be UCC’d up to their necks, have other creditors or governmental agencies in line before you, or may not have enough cash to sustain business much longer.  Again, it is imperative to determine if a personal guarantee exists.

A skilled and experienced collector has the ability to see and interpret the story behind the facts.  This skill in “reading” the debtor allows them to determine which course of action offers the client the greatest probability for successful recovery.  If you have any questions or need further assistance, please call us at 866-952-2007.  We would be happy to assist.

*Source Citation: "Adjustment and Collection Services." Encyclopedia of American Industries. Online Edition. Gale, 2004. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2004.