Survey: Cost of Labor Accounts for Half of Collection Agency Revenue

People, Postage and Phones: They’re often referred to as the “three P’s” that dominate the bottom line at companies throughout the credit and collection industry. But it’s the “people” costs in particular—those for labor, employee benefits and payroll taxes—that account for nearly half of an agency’s gross annual revenue, according to the recently-released 2008 Agency Benchmarking Survey by ACA International, the Association of Credit and Collection Professionals (ACA).

Nationally, an average of 40 percent of agency gross revenue went to employee compensation in the form of salaries, wages, bonuses and commissions, making it the single largest expense line for the typical collection agency. Just under five percent went to payroll taxes and another two percentage points covered employee training, retirement plans and other company-sponsored benefit plans.

Health insurance premiums continue to rise much faster than the rate of overall inflation and represent a major concern for collection agencies, and small businesses in general. Company-sponsored health insurance expenses averaged three percent of agency revenue last year, surpassing even the costs for telephone service at the typical agency.

The periodic benchmarking study conducted by ACA surveys the association’s U.S. collection agency members to help industry professionals gauge performance, compare costs and improve the efficiency of their businesses. The 2008 report features data collected from 214 ACA members for the 12 months ending Sept. 30, 2007. Most information is broken out by agency size to allow more meaningful comparisons among peer groups.

In addition to revenue and expense statistics, the study includes industry benchmarks for liquidation percentage, average account balance, revenue per collector, cost per account, best times/days to call and number of accounts in collector queue.

The 2008 Agency Benchmarking Survey is available to ACA members in electronic format ($225) or in hardcopy ($325 + shipping/handling). Nonmembers may purchase a hardcopy of the report for $685 (plus shipping/handling). To order visit http://www.acainternational.org/2008Benchmarkstudy or call Member Services at +1(952) 928-8000, ext. 711.