SunGard Report Evaluates Risk Grade as More Effective Collections Benchmark versus Aging Alone

A SunGard report on strategies corporations use to place debtors with collection agencies, challenges the practice of sending B2B trade receivables to an agency based on age alone. While only 38% of the respondents state that they incorporate risk into their decision-making, an overwhelming 96% cite “age” as the determining factor. The report, which surveyed 189 global participants across 19 industries, examines the practicality of this approach and challenges corporations to also consider inherent risk as a key factor.

Of the organizations using age as the determining factor, 80% stated they do not send invoices to collection agencies until they are 90 or 120 days past due. The report looks at how companies can improve recovery rates by sending high risk customers to an agency sooner. This is accomplished by leveraging statistical models to help identify high risk customers for earlier placement with collection agencies versus relying on age as the only determining factor.

“While some organizations now engage in risk-based collections, which is the practice of modifying a collection strategy based on the inherent risk of the customer, many still do not use risk as a factor when determining which customers to place with a collections agency,” said Jim Mangano, senior vice president, receivables solutions, SunGard’s AvantGard business unit. “Statistical modeling is a method that helps corporations make this decision by using a combination of behavioral analytics based on years of aggregated data and transactions, combined with payment history details to determine the likelihood of customers’ delinquency in the future.”