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Risk-Based Collections

Originally Published: September 2012

Using Statistical Scoring to Drive Collections Prioritization

This article is provided by SunGard Avantgard and reprinted with permission.

Risk-based collections is not a new concept. Surprisingly though, many credit and collections departments have not adopted this method and still prioritize collections based on aging. The customer who owes the most money for the longest period of time receives the highest priority. But using aging alone to prioritize collections activities may be the wrong strategy; especially if the company's goal is to optimize collection efficiency, improve DSO and reduce write-offs. By incorporating statistical-based risk modeling into collection strategies, corporations have better information to use to segment accounts and assign the proper resources and collection methods.