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Best Bang for Your Buck!

By Jessica Schulze on Thursday, December 19, 2013 03:07 PM

As the economy continues to improve, do you find that your debtors are more likely to switch jobs, move residences, or even voluntarily repossess knowing that the competition will finance a new car at the drop of a hat?  This is the time when you need to look at your collection department and make sure that you are getting the best bank for the buck.

 

There is no shortage of benchmark information regarding collections.  It's what you do with that information that matters.  Do you have a KPI matrix?  Are your bonuses tied to KPI's?  Are you asking what a KPI is?  KPI stands for key performance indicator.

Here is a short list of KPI's that you should be looking at regularly:

Accounts out for repo

Repossessions on hand

Delinquency

Recency

Cas collection vs goal

Charge off %

Charge off % by collector

Charge off % by underwriter

Charge off % by location

Static pools overall

Static pools by underwriter

Static pools by collector

Static pools by location

 

Many dealers ask about cash collection.  It is important to know what your cash collection expectation is for each month.  Do you know how much money you SHOULD be collecting each month?  If not, then make a note to have the answer to that question before the sun sets today.  In its most basic format, the cash collection goal is quite simple.  You will need to know the average payment of your portfolio and multiply it by the number of loans in your portfolio.  This will give you a very general number that you should be achieving.  I have developed a spreadsheet that has additional variables such as payoffs, one-day/one-dollar calculations and per collector goals.  Shoot me an email at Jason@pivotrocksolutions.com and I will be happy to send it to you.

 

At the end of the day, we all just want to sell more cars..  But let's face it, without a strong and COMPLIANT collection department, it all becomes charity work if we do not collect payments.  However, there is an alternative to managing your collection department, it is called outsourcing.  Just as you are a professional at selling cars, there are professional collectors and professional collecting companies that do nothing but collect.  Do you call your past due accounts on the first day of delinquency or do you call when you are short on cash?  As Dr. Phil would say... "how's that working out for you?"  Most outsourcing companies have a very consistent schedule and call on the first day of delinquency and will continue efforts until arrangements are made.  Depending on the outsourcing company pricing, costs are usually comparable to operating your own collection staff.  More importantly, your cash flow should increase, and with constant, professional and compliant collections, your charge-offs and delinquency should improve.

 

Jason Anderson is a partner in Pivot Rock Solutions.  He has over 20 hears of automotive and finance experience. 

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