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Five KPIs for the collections department

In the world of collections, key performance indicators (KPIs) are incredibly pervasive – and vitally

important in measuring recovery on receivables.

KPIs are a form of measures used in evaluating how well an organization or employee is meeting
certain performance goals.

The raw number of available KPIs can get overwhelming. How does one distinguish the most relevant
to your bottom line?

Although what fits best may vary for different collections departments and organizations, and many

collections professionals may have their own favorite KPIs, below are the five that are the most likely
indicators of the success and health of your operations.

Days Sales Outstanding (DSO)

DSO is the number of days it takes a customer to pay after an invoice has been generated or a sale has

been made.

One of the most commonly used metrics, DSO is used to calculate how long, on average, it takes to
collect from debtors. This makes it easy to compare the performance of your organization against

others in the industry to see whether and by how much your performance could stand to improve.

Ideally, the number should be as low as possible, as a higher number reflects a lack of effectiveness on

your organization’s part.

However, it’s definitely worth noting that the metric generally only provides a more global view of your
organization’s efficiency, and you must rely on other KPIs for more specific details on particular

aspects of your organization’s operations.

CEI provides another global view of your organization's operations, and is a commonly-used KPI that

is sometimes confused with DSO.

However, this metric reflects an organization’s ability to retrieve their accounts receivable from
customers. It is a measure of the amount collected during a specific period of time against the amount

of total receivables during that same period.

CEI is measured as a percentage, with an organization at 100% CEI collecting all of its total

receivables ever invoiced. As an organization lowers its DSO numbers the CEI should increase

correspondingly.

CEI should likely be measured by just about any collections organization, as it can track the direction
in which your operations are moving over longer periods of time.

Right Party Contacts (RPC) rate

RPC rate is the first of the more specific metrics on this list.

This KPI measures the ratio of all outbound calls that were made to a valid phone number of the

person from whom collection is sought (or a “right party”). For collections organizations, the higher
this number, the better, since a high score indicates a high success rate of locating debtors.

Clearly, actually locating and connecting with the correct person is the first step to collecting a debt,
and if your organization’s RPC rate is lower than other peers in the industry, you likely have to take a

hard look at what’s going wrong, and how you can improve these numbers.

There are a variety of other KPIs related to calls, such as the number of calls handled and average call

time, but perhaps the most relevant to the efficiency and success of your organization is whether these
calls are connecting to the correct individual on the other end of the line – which is exactly what the
RPC rate measures.

Any collections organization with a call center should be using this KPI, and the metric may be
improved through using a sophisticated proprietary data and public records solution that leverages

real-time data to get the most information possible on the debtor in question.

Percentage of Outbound Calls Resulting in Promise to Pay (PTP)

The PTP rate is as important as your RPC rate in measuring efficiency, and it is the next logical step to

a successful collection of debt.

In short, where the RPC rate measures the success rate of dialing the correct individual, this metric
measures the success rate of those RPC calls. This is another percentage that you want as close to 100

as possible.

If your numbers are lower than your peers in the industry, you may have to evaluate the tactics being
used by your employees during these calls – not to mention any related employee training programs.

While there is nothing short of a glut of KPIs available for tracking the performance of your collections
employees, the PTP rate, together with the RPC rate, probably offer the two best ways to look at your
organization’s level of efficacy in practice.

Locating the correct contact is essential to securing a promise to pay. And one of the fastest and
easiest methods of finding a correct contact is through a technology solution that offers copious, up-

to-date data from sources such as utilities and credit reporting agencies, and one that can dig even
deeper by locating known associates of your search target.

Profit per Account (PPA)

Finally, PPA measures how much profit is generated on average by each account in collections. In
short, this KPI measures how much each account impacts your bottom line.

The metric is calculated by dividing your organization’s gross profit (which is calculated by subtracting

total operating expenses from total revenue) over a specific period of time, and dividing that by the
total number of delinquent accounts managed during that period.

There are a variety of factors that can work to hinder efforts to maximize profits, essentially all of
which can be traceable to one of the inputs in the PPA calculation (i.e., revenue, operating expenses,

number of accounts managed, etc).

For that reason, it’s likely a good idea to monitor how those inputs are performing over time as well,

allowing you to better understand how changes directly impact your bottom line.

For example, too sudden of an increase in accounts managed without a corresponding increase in

gross profit may lower your PPA. Perhaps further analysis can identify an age beyond which accounts

are very unlikely to produce a return of any kind, and thus it would be a waste of resources to attempt
to collect on them.
 Caution may be necessary here, since the constant effort to control costs may limit the tools available
to your organization to maximize its effectiveness. Thus, although costs must indeed be monitored

and controlled, the return on investment offered by such tools often outweighs the upfront expense in

productivity gains several times over.

Organizations will likely want to use even more KPIs than these five, and there is certainly no shortage

to choose from.

Nevertheless, these specific metrics have been highlighted as those that may be the most telling on

the overall health of your operations.

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