Question
Your organization has a major problem in collecting on overdue accounts receivable with $10 million in outstanding debt. As a result, it is considering making
Your organization has a major problem in collecting on overdue accounts receivable with $10 million in outstanding debt. As a result, it is considering making a $100,000 investment to improve the accuracy of its accounts receivable data. Based on results of competitors in your industry, you can expect to collect about 30% of the outstanding debt or $3 million by accurately identifying contact data for non-paying customers. The remaining $7 million of outstanding debt would be turned over to a collection agency. The expected recovery rate is 25%. How much of the outstanding debt would be recovered through a combination of data quality improvement and collection agency efforts? How much debt would be recovered if the entire $10 million in outstanding debt were turned over to the collection agency? What is the additional net revenue generated from a combination of data quality improvement and collection agency efforts?
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