Contingency collections is a "no fee, no pay" system of placing accounts for collections.  An account is placed with at no charge and a % fee is deducted when we are able to effect a payment from your debtor.

 The % fee is determined by a number of factors.  Some of these factors are:

1.  Balance of account or average balance of accounts.

2.  Age of account.  The age is determined by measuring the date of last payment to the date placed.  A 90 day past due account has a higher probability for collection and therefore should command a lower rate.  An account over 1 year past due has a lower probablity for collection and would most likely be charged a higher rate.  Generally speaking, your company's A/R loses .5% in value for each day it is past due.

3.  Retail or Commercial. 

 The key to measuring Outcome versus Cost is to take into account the contingency fee as it relates to the success of recovery.  By focusing on the contingency fee clients sometimes lose sight of the big picture which is the Effective Rate.  

Effective Rate vs. Contingency Fee

Determine Your Effective Rate

Many clients will look to squeeze a lower contingency fee from an agency and by doing so will sacrifice performance.  Getting a lower fee will buy you a lesser collector and therefore money left on the table.

The key is to measure and track your EFFECTIVE RATE which measures net dollars returned to your company, not net dollars paid to an agency.