11 Critical Debt Collection KPIs

May 29, 2024

Managing debt can be a headache. You have to call people who don’t want to be called, contact information is often not up-to-date, and there can be frequent breakdowns in communication between collectors and debtors. 

However, by tracking the right debt collection KPIs, you can gain a better understanding of your operations and begin maximizing performance.

Debt collection campaigns can differ based on the industry or sector – but there are a few essential debt collection KPIs that are useful in any collections project. In this post, I share the ones I found particularly important when I worked as a Collection Supervisor for more than six years.

1. Recovery Rate

Recovery Rate is a fundamental KPI in debt collection that measures the efficiency and effectiveness of the collection efforts. It indicates the percentage of the total outstanding debt that has been successfully recovered over a given period. This metric is crucial for understanding how well the collection strategies and processes are performing. A high recovery rate signifies that the collection methods are effective, while a low rate may indicate the need for strategy adjustments.

Businesses often use this metric to benchmark their performance against industry standards and historical data. It also helps pinpoint early signs of collection issues, enabling quick intervention to improve outcomes.

The following formula is used to determine Recovery Rate:

Recovery Rate = [ Total Amount Collected    ] * 100
Total Amount of Outstanding Debt

2. Days Sales Outstanding (DSO)

Days Sales Outstanding (DSO) is a metric used for measuring the amount of time it takes for a company to collect its outstanding credits. In other words, the money it’s owed. The period of time used to measure DSO can be monthly, quarterly, or annually.

A consistently high DSO can lead to long-term cash flow problems. Although debt will be paid, the question is, when? It’s naturally in the interest of all collection campaigns to collect outstanding debt as soon as possible.

To determine how many days it takes, on average, for a company’s accounts receivable to be realized as cash, the below formula is used:

DSO = [ Accounts Receivables    ] * Number of Days
Net Credit Sales

3. Right Party Contacts Rate (RPC)

Right Party Connects (RPC) is a measure that looks at how effectively companies connect with the most appropriate person. It’s a good measure of your outreach effectiveness and contact database accuracy. 

A high score demonstrates a high success rate of locating debtors. The metric is defined as the percentage of calls made where the agent was able to connect to the intended person. This percentage is then divided by the total number of attempted calls:

RPC Rate = [ Number of Right Party Contacts    ] * 100
Total Number of Contact Attempts

4. % of Outbound Calls Resulting in Promise to Pay (PTP)

Promise to Pay (PTP) measures the number of outbound calls to customers resulting in a promise to pay. This is in relation to the total number of outbound Right Party Contacts (RPCs) made by collectors over the same period of time. 

PTP Rate = [ Number of Outbound Calls Resulting in PTP    ] * 100
Total Number of Outbound Right Party  Contacts

In other words, while RPC measures if your calls are reaching the correct contacts, PTP measures how successful these conversations are.

You want this debt collection KPI to be as close to 100% as possible. A low value for this metric means that your debt collection campaign is not efficient. PTP in combination with RPC can offer the best overview of your operation’s efficiency.

5. Promise Kept Rate

Promise Kept Rate indicates how effectively debtors follow through on their financial commitments to pay. 

It can be calculated by comparing the total amount of money promised by debtors to the amount actually paid within a specified period.

Promise Kept Rate = [ Total Amount Paid    ] * 100
Total Amount Promised

Another way to measure Promise Kept Rate is to compare the promises made by debtors to the number of promises kept by them, giving you a better understanding of your customer base. 

Promise Kept Rate = [ Number of Promises Kept    ] * 100
Number of Promises Made

Measuring the Promise Kept Rate helps you assess debtors’ financial reliability, evaluate collection effectiveness and identify trends – patterns and differences between promised and actual payments can help you plan and allocate resources in a more effective way for future campaigns. 

6. Call to Payment Conversion Rate

This KPI calculates the percentage of calls that result in a payment being made. It evaluates the effectiveness of the collection agents’ communication and negotiation skills. A higher conversion rate means that the agents are successful in persuading debtors to make payments during calls, reflecting the efficiency of the collection process.

Check out this short video to see how easy it is to make over-the-phone payments using VCC Live:

By analyzing the call to payment conversion rate, companies can identify the best practices and strategies used by high-performing agents and implement them across the team. This KPI also helps in identifying training needs and areas where agents may require additional support. Continuous improvement in this metric can lead to more successful collections and better overall performance of the collection team.

Here’s the formula for this KPI:

Call to Payment Conversion Rate = [ Number of Payments Made During Calls    ] * 100
Total Number of Calls Made

7. Dispute rate

The dispute rate measures the percentage of accounts that are disputed by debtors. It helps identify potential issues with billing accuracy or customer service. A high dispute rate may indicate problems that need to be addressed to improve collection efficiency, such as errors in invoicing or misunderstandings about payment terms.

By analyzing the dispute rate, businesses can pinpoint the root causes of disputes and implement corrective actions. This KPI also highlights the importance of clear communication and accurate billing practices. Reducing the dispute rate can lead to more efficient collections and better relationships with customers, as it minimizes friction and enhances trust.

Dispute Rate can be determined using the following formula:

Dispute Rate = [ Number of Disputed Accounts    ] * 100
Total Number of Accounts

8. Profit Per Account (PPA)

Profit Per Account (PPA) measures how much overall revenue is made by each account.

This debt collection KPI is calculated by dividing your organization’s overall profit over a set period of time and dividing that amount by the total number of outstanding accounts handled within the examined period.

Profit per Account = Overall Profit    
Total Number of Outstanding Accounts

There are a variety of factors that can hinder efforts to maximize profits, such as revenue, operating expenses, and the number of accounts managed. For that reason, it is a good idea to monitor how these variables are performing over time as well.

9. Cost per Collection

This KPI calculates the average cost incurred to collect each debt. It includes all expenses related to the collection process, such as agent salaries, communication costs, and administrative expenses. Lower costs indicate more efficient collection processes, as the company is able to recover debts with minimal expenditure.

Monitoring cost per collection helps businesses understand the financial efficiency of their collection efforts. By identifying and addressing cost drivers, companies can optimize their processes and reduce expenses. This KPI is also useful for benchmarking against industry standards and ensuring that collection efforts are cost-effective and sustainable.

Here’s the formula:

Cost per Collection = Total Collection Costs    
Number of Debts Collected

10. Settlement rate

This KPI measures the percentage of debts that are settled for an amount less than the full balance. It reflects the effectiveness of negotiation strategies and the willingness of debtors to settle. A higher settlement rate can indicate successful negotiation tactics and a flexible approach to debt recovery.

Analyzing the settlement rate helps businesses understand the effectiveness of their settlement policies and identify areas for improvement. It also provides insights into debtor behavior and the economic conditions affecting their ability to pay. By optimizing settlement strategies, companies can improve recovery rates and maintain positive relationships with debtors.

Settlement Rate = [ Number of Settlements    ] * 100
Total Number of Debts

11. Bad Debt to Sales Ratio

Bad debt is the amount that your campaign was not able to collect and was written off as an expense. This can happen when your debtors declare bankruptcy, or when further collection efforts cost more than the debt itself.

This KPI is calculated by looking at the company’s total value of debts and total sales. If this metric increases, it means that the company offers credit to risky clients, generating bad debt.

This KPI is understood as a percentage. A high bad debt to sales means that the creditor takes on too many risky clients. Try to identify customers who regularly generate bad debt and adjust your loan terms accordingly. 

Bad Debt to Sales Ratio = [ Total Bad Debts    ] * 100
Total Sales

More KPIs to track

Besides debt collection-specific KPIs, other contact center-related metrics are definitely worth tracking as well. As collection campaigns tend to put more emphasis on outbound efforts, I recommend you check out the following webinar:

How to level up outbound KPIs in call centers – Practical tips from experts

Here, contact center experts Gavin Stewart and Barnabás Blénesi give plenty of actionable tips to boost some of the most typical outbound KPIs. In particular, they share how to get more out of Talk Time, Reachability, Handling Time and Dropped Call Ratio. Additionally, they discuss using fully custom KPIs as well. 

Another useful resource I recommend is our Call center KPI library, where you can learn more about some of the most known metrics you might need in your operations, including First Call Resolution or Cost Per Call

Check out the full collection of call center KPIs here. 

We’re here to help you boost debt collection campaigns

There are many debt collection related KPIs, which makes it difficult to know where to start measuring your effectiveness. These 11 critical KPIs are a good basis for any debt collection operation, regardless of sector focus.

Once you have a firm awareness of your operations, you can ramp up efficiency of your campaigns by using the right debt collection software and payment tools based on your specific needs.

Contact us today so we can help you supercharge your collections campaigns.

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