Highlights:

The collection of overdue accounts and recovery of unpaid debt is a critical

component of every major credit-granting organization. The ability to recover
monies due and manage risk effectively is a key component of the performance
of every business. If you consider that the profits earned from many good
accounts will be wiped out immediately by one bad account then the importance
of effective collections and recoveries strategies and processes becomes very
apparent

Types of accountscommonly outsourced

Before attempting to answer this question lets identify the type of accounts that
are commonly outsourced:
- 90 day delinquencies
- Written off accounts
- Litigation required
- Alternative action required, e.g. field
investigation or door to door visit
-Accounts where accelerated
treatment has been recommended
Unlocatable (gone away / trace) or too costly to locate
unwillingness to pay where there are believed to be assets or
cash flow to service the debt

Benefits of outsourcingdebt collection activities

Economies of scale

The expectation is that DCAs will be more efficient due to the volumes of
accounts on which they are collecting together with their ability to spread fixed
costs over greater volumes leading to a reduced cost of collection per account.
Controlling costs
Money collected per positive contact, for more seriously delinquent or other
collection activity accelerated account results, increases the average cost of
collection
Tracing
Managed through the collection system with leading exponents of DCA tracing
combining internal expertise with automated treatments that call out to trace data
sources (usually 1 or multiple credit bureaux) to establish linked address matches
for the customer.

Data matching
The use of a credit bureau can offer significant advantages to leading DCA
practitioners, enabling them to link the same customer across multiple products
or accounts through bureau matching routine
Skilled collectors dedicated to converting contact to payment Typically
strong negotiation skills coupled with listening, empathy and closing techniques
ensure that the strategies and treatments are ultimately successfully translated
into cash collection.

DCAs are becoming increasingly sophisticated in how they work andthe

leading organisations will generate revenues from debts regardless ofhow hard
they have been worked bythe originator, provided the incentive is appropriate.
The relationship is symbiotic and where true partnerships are in place and best
practice deployed then results are advantageous to all involved. It is an element
of collections and recoveries we see working effectively for some considerable
time
http://www.creditnetwork.com.au/files/6113/6962/3356/Outsourcing.pd