One method of measuring the success of a collection agency is by the liquidation percentages achieved by that agency. The liquidation percentage is the percent of allocated accounts the agency is successful in collecting, which is the recovery rate of the agency. As a straightforward measure of performance, it helps compare agencies when searching for one capable of handling your collection needs. It does not, however, take into account the age of the accounts serviced by the agency or account types. But the calculation is simple and provides a quick look at the overall success of the agency in question.
Determine the amount in dollars referred to the collection agency over the calculating period by researching the contracting records. Use a year’s worth of data, if possible, to compensate for seasonal shifts in referrals.
Check the reports sent to you by the collection agency on collections received by the agency during the calculating period. Only include actual monies collected by the agency on the accounts referred, not accounts receivable or committed collections.
Divide the total amount collected during the calculating period by the total amount referred during the same period to calculate the liquidation percentage of the collection agency. For example, an agency that collects $100,000 on $1 million in referrals over the past year, has a liquidation percentage of 10 percent for that year.
Larry Simmons is a freelance writer and expert in the fusion of computer technology and business. He has a B.S. in economics, an M.S. in information systems, an M.S. in communications technology, as well as significant work towards an M.B.A. in finance. He's published several hundred articles with Demand Studios.