A Review of Delinquent Accounts Placed with Certified Third-Party Collection Agencies

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04. 04. 19
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Last Updated: April 04 2019
Created: April 04 2019
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How 2018 Measures Up to Previous Years

A mission of Commercial Collection Agencies of America is to be the premier industry resource to the credit community by furnishing insightful data. A primary path is to consistently supply credit practitioners with useful, analytical resources by way of a scope into the commercial collection industry.

One of these resources is the analysis of commercial accounts placed with third-party agencies for collection. Credit practitioners routinely use this data, most effectively, when interfacing with their sales teams and upper management, as well as in benchmarking exercises.

The data is gathered in accordance with a certification requirement mandated by an Independent Standards Board, to submit quarterly account placement reports by each of the member agencies of Commercial Collection Agencies of America. The requirement coupled with numerous others are promulgated by the Board to create an unparalleled certification program which aids and protects the credit community.

The compilation of this data allows the Association to produce an aggregate, comprehensive, quarter-by-quarter analysis for both the credit and collection industries.

To prepare this report, three indices are examined:

  • The number of accounts placed for collection (received by agencies)
  • The dollar amount of accounts placed for collection (received by agencies)
  • The resulting average-sized account

For the purposes of this analysis, the association has studied the last three (3) years, (twelve quarters) and made notations of historical statistics where applicable. It should be noted that since membership has changed over the years, adjustments have been made to previous reports to reflect additions and deletions of members to give an accurate comparison. Further, when historical numbers are quoted, only current members’ historical numbers are utilized when analyzing placements. Over the years, analysis has proven that any change over eight percent (8%) is considered significant.

 

NUMBER OF ACCOUNTS PLACED FOR COLLECTION

The association studies the number of accounts placed for collection and their movements between quarters within a particular year and compares those movements from year to year.

FOURTH QUARTER

When we compare the number of accounts placed for collection in the fourth quarter of 2018, to the fourth quarters of the previous years, we see:

  • A notable increase of 10.3% from the placements in 4Q 2017
  • An increase of 3.16% from placements in 4Q 2016
THIRD QUARTER

When we compare the number of accounts placed for collection in the third quarter of 2018, to the third quarters of the previous years, the placements:

  • Impressively increased at a rate of 19.44% from 3Q 2017
  • Yet, decreased 7.69% from 3Q 2016
SECOND QUARTER

When we compare the number of accounts placed for collection in the second quarter of 2018, to the second quarters of the previous years, the placements:

  • Increased modestly, 2.55%, from 2Q 2017
  • Increased 4.75% when compared to 2Q 2016
FIRST QUARTER

When we compare the number of accounts placed for collection in the first quarter of 2018, to the first quarters of the previous years, we see:

  • an increase of 4.22% from the placements in 1Q 2017
  • a significant increase of 15.91 from the placements in the 1Q 2016

NUMBER OF ACCOUNTS PLACED FOR COLLECTION - MOVEMENT BETWEEN QUARTERS

Atypically, the third quarters of 2018 and 2016 registered the largest number of accounts placed for collection, while in 2017, that title went to the first quarter. As we have reported in the past, usually our research bears out that credit practitioners place the largest number of accounts with third party agencies prior to year-end to accommodate write off policies. Most notably was in 2015, when there was a strong 26% gain in the number of accounts placed for collection in the fourth quarter when compared to the third quarter. The Association will further study with credit managers why this trend has changed.

In 2018, the number of accounts placed in the fourth quarter dropped 6.8% from the number of accounts placed in the third quarter.

In 2017, placements in the third and fourth quarters were relatively the same, experiencing only a modest decrease from 3Q 2017 to 4Q 2017. 

In 2016, we saw a significant drop when comparing fourth quarter placements to third quarter placements.

FULL YEAR REVIEW

For FY 2018, the number of accounts placed for collection was 8.81% higher than FY 2017 and 3.32% higher than FY 2016.

 

ACCOUNTS PLACED FOR COLLECTION

A Look Back in Time….

An increase from 2007-2009

A significant decline from 2010-2013

Numerous fluctuations between quarters in 2014 and 2015

A steady increase in 2016 until the fourth quarter

In 2017, a consistent decrease from Q1 to Q3, followed by a less than 1% increase from Q3 to Q4

In 2018, increases over 2017 and 2016. Within 2018 quarters: a 4% decrease from Q1 to Q2, a 5% increase from Q2 to Q3

and a 6.8% decrease from Q3 to Q4

 

DOLLAR AMOUNT OF ACCOUNTS PLACED FOR COLLECTION

Another measure used is the dollar amount of accounts placed for collection.

In 2018, the results were as follows:

FOURTH QUARTER

When we compare the dollar amount of accounts placed for collection in the fourth quarter of 2018 to the fourth quarters of the previous years, we see:

  • An increase of 13.15% over the dollar amount of placements in 4Q 2017
  • A sharp 10% decline from the placements in 4Q 2016
THIRD QUARTER

When we compare the dollar amount of accounts placed for collection in the third quarter of 2018 to the third quarters of the previous years, we see:

The dollar amount of accounts placed for collection in the third quarter of 2018, was

  • 11.4% higher than the dollar amount of accounts placed in 3Q 2017
  • 2.52% lower than the dollar amount of accounts placed in 3Q 2016
SECOND QUARTER

When we compare the dollar amount of accounts placed for collection in the second quarter of 2018, to the second quarters of the previous years, the placements:

  • Increased 11.62% when compared to 2Q 2017
  • Decreased 2.25% when compared 2Q 2016
FIRST QUARTER

When we compare the dollar amount of accounts placed for collection in the first quarter of 2018, to the first quarters of the previous years, we see

  • a 4.26% increase from the placements in 1Q 2017, which is the smallest increase of all quarters
  • and unlike the other quarter movements which declined when compared to 2016, Q1 2018 was 4.73% higher than 1Q 2016

 

DOLLAR AMOUNT OF ACCOUNTS PLACED FOR COLLECTION

A LOOK AT THE FULL YEAR ACTIVITY FOR 2016-2018

• Clearly 1Q 2018 and 2Q 2018 showed the largest dollar amount of accounts placed for collection when looking at the full year. 3Q 2018 dipped nearly 9% from the dollar amount of accounts placed for collection in 2Q 2018; only to see

• From 1Q 2017 to 4Q 2017, there was a significant decline in the dollar amount of accounts placed for collection. The first quarter of 2017 exhibited the largest dollar amount of accounts placed for collection of any of the year’s quarters. The

• From 1Q 2016 to 4Q 2016, the dollar amount of accounts placed for collection with members increased by 6.15%.

 

A review of the archives gives us a historical perspective on the dollar amount of accounts placed for collection:

DOLLAR AMOUNT OF ACCOUNTS PLACED FOR COLLECTION

A consistent increase for the period of 2007-2009

A consistent decline for the period of 2010 to 2013

Fluctuations from quarter to quarter in 2014

The highest levels of dollar amount of accounts placed in 2015 and 2016 & 1Q 2017,

then a steady decline in placements in the remaining quarters of 2017

An impressive comeback 2018

 

AVERAGE-SIZED ACCOUNT

During the last twelve (12) quarters, our analysis shows that the average dollar amount of a delinquent receivable placed with a certified commercial collection agency ranges from just below $3,000 to slightly less than $4,000, which is considerably higher than previous years studied.

FOURTH QUARTER

The average-sized account in 4Q 2018 compared to previous years as follows:

  • Increased 2.6% from the average-sized account in 4Q 2017
  • Severely declined-12.79% when compared to 4Q 2016

(It should be noted that the 4Q 2016 average-sized account was the highest in the twelve (12) months studied.)

THIRD QUARTER

The average sized account in 3Q 2018 was:

  • 6.72% lower than in 3Q 2017
  • 5.63% higher than in 3Q 2016

(It should be noted that the 3Q 2016 average-sized account was the lowest in the twelve (12) months studied.)

SECOND QUARTER

The average-sized account in 2Q 2018 was:

  • 8.84% higher when compared to 2Q 2017
  • 6.68% lower when compared to 2Q 2016
FIRST QUARTER

The average-sized account in 1Q 2018

  • Was within $2 of the average-sized account in 1Q 2017
  • Yet, it was 9.63% lower than the average-sized account in 1Q 2016.

 

AVERAGE-SIZED ACCOUNT

FULL YEAR OVERVIEW

From 1Q 2018 to 4Q 2018, there was nominal change between the average-sized accounts.

  • In 2018, the average-sized account fluctuated from quarter to quarter: From 1Q 2018 to 2Q 2018, the average-sized account increased 6.88%.
  • From 2Q to 3Q, the average-sized account decreased 13.33% and from 3Q to 4Q 2018, the average-sized account increased 10%.

In past years:

  • From 1Q 2017 to 4Q 2017 the average-sized account decreased slightly. The average-sized account in 2017 was approximately $200 less than the average-sized account for FY 2016
  • From 1Q 2016 to 4Q 2016, the average-sized account increased over 5%.

 

AVERAGE-SIZED ACCOUNT

Consistent increase between the years 2007 to 2013.

In 2014, a decrease from previous years

In 2015, increased each quarter until the last quarter

In 2016, continued to rise; higher than the average-sized accounts during 2007-2014.

The average-sized account for 2016 was higher than 2017 and 2018.

In 2017, the average-sized account stayed consistent throughout the quarters

In 2018, the average-sized account was higher than in 2017

 

SUMMARY

Last year, we stated that certified agency members of Commercial Collection Agencies of America, who are tenured practitioners in their field were optimistic that they will see increases in the indices studied in 2018. Our research shows that they realized those increases.

While we look to the economic indicators such as GDP growth, manufacturing output and employment, especially in manufacturing, we must also recognize that credit practitioners realize the necessity of promptly placing delinquent accounts with third party agencies.

Another one of the Association’s studies indicates that the probability of full collection on a delinquent account drops drastically according to the length of the delinquency. We routinely share our studies with credit practitioners and encourage the services of a certified commercial collection agency on a regular basis to ensure a healthy cash flow.

For copies of our other studies, please contact Annette M. Waggoner, Executive Director at 847-907-4670 or awaggoner@commercialcollectionagenciesofamerica.com.