It’s important to understand how to calculate the lowest amount accepted when you go into debt collection activities. More specifically, if an account has a balance that is now older than 60-90 days, negotiations will most certainly come into play and a lowest amount accepted should always be pre-calculated.
To do this, you’ll first need to figure out what the cost of your next steps will look like — labor, outsourcing, legal actions, etc. Unfortunately, if you have accounts that have aged this much, collection will become much more difficult — so make sure to keep this in the back of your mind moving forward.
Let’s take a quick look at the most common costs associated with this facet of debt collection and provide you with a few stats to remember.
Common costs associated with debt collection
There are 3 common costs you can expect to incur when trying to collect on debts past 60-90 days old. The below costs are averages we’ve seen as a debt collection agency in California. Take a look at these averages and use them as a way to calculate the lowest amount accepted for each individual account.
Are you assigning your account to a debt collection agency?
Commission rates are usually between 25% to 35% of the total balance
Are you attempting to collect debt in-house?
Labor costs can range between $15-$20 an hour
Will you need to take legal action?
The average cost of litigation is $800
Related Content: Debt Collection Forms and Resources
Quick facts to remember during the debt collection process
- On average, it takes around 8 calls to collect a debt.
- On accounts past 90 days old, the average collection rate can be as low as 10% of total balance bucket
- On average, it takes around 2 hours of labor to collect a debt.
- On average, only 10% of accounts older than 60 days are collected in-house, while 50% of accounts older than 60 days are collected by debt collection agencies.
Need help collecting debts past 60-90 days old?
At HP Sears, we have experience collecting on aged accounts for a variety of industries, including healthcare, retail, finance, and construction. If you’re interested in learning more about our debt collection services and success stories, give us a call or fill out our online form. We’d love to talk.