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Metrics for Debt Collection

Six Sigma – iSixSigma Forums Old Forums Finance Metrics for Debt Collection

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  • #24782

    RK
    Member

    HI,
    Other than DSO, is there any other good metric in debt collection which can be improved using six sigma? are discreet metrics better in debt collection or continuous metrics?
    thanks

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    #59407

    Adam Bowden
    Participant

    OK – here is some “thinking out loud” …… Debt collection is the effect
    … the effect is caused by the process
    … radically re-design the process to minimize debt issues (i.e
    credit checks, pre-payment, selling the debt/financing.It is the process that provides the results – change the process and
    get different results.Adam

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    #59546

    Tomas Wolf
    Member

    There are few others, especially in banks and consumer finance. You can improve so-called roll-rates, which are rates that go into different DPD buckets (eg. 5-30 DPD, 31-60 DPD and so on).Roll rates depend on several things and by improving them, you will a) save on communication cost, b) improve short-term liquidity and c) (if you work in the insurance industry) saved clients profitability.But as previously said, collections is an external quality correction process; redesigning the underwriting process, lowering Sales-to-Collection ratio and other relevant metrics would be more effective.

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