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CHAPTER NINE: Measurements for the Accou... > PERCENTAGE COLLECTED OF DOLLAR VOLUM...

PERCENTAGE COLLECTED OF DOLLAR VOLUME ASSIGNED

Description: The collections function is difficult to manage, since it is highly dependent on the hiring and support of a skilled group of collections personnel. This requires constant monitoring of collection results and replacement of those who are not performing above a minimum level. To do so, a good measure is the percentage of overdue invoices collected out of all those that have been assigned to each member of the collections staff. The measure can be used to monitor the performance of either an internal collections staff or a collections agency to which accounts have been assigned.

Formula: If a collections agency is being monitored, divide the cash received back from the agency by the total amount of accounts receivable assigned to the agency. Since the numerator will include the collection agency's fee (which is subtracted from any funds collected), however, it will tend to show an unusually low percentage; one may consider removing the fee deduction when running the calculation so as to get a better idea of the collection agency's performance. The formula is:


  

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