In yesterdays post we gave an overview of the “Collection Curve Method” for forecasting debt collections. Today I would like to expand on what we have covered thus far and give you some further insight into the model.
The first thing we need to understand is that this is an aggressive strategy. In order to assure the best chance of success, the collection agency must maintain a strong focus on collection activity and be clear on the expectations. There are very few agencies willing to use this method simply because of the massive effort and discipline needed in order to produce targeted results. Fortunately for us and our clients, Ropay Asset Investors collection agency of choice is a master at this method of collections.
Another important note is that not all portfolios will perform the same. Portfolios with similar characteristics will generate varying cash flows based simply on statistical probability. The results achieved on any individual portfolio may differ from the forecast because forecast’s are a best guess based on expectations and experience. What’s important is that the analysis holds true when taken against our entire universe of portfolios.