Pareto Principle in Collections

Pareto PrincipalWe often get asked by our clients looking for our assistance in structuring their collection departments the following, “Is it better to assign certain accounts to an individual recovery specialists or leave them unassigned and have them worked as a team?”

We ask them to consider the Pareto Principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity).

It states, roughly 80% of the effects, come from 20% of the causes.

In the case of credit management, 80% of your revenue probably comes from 20% of your accounts.

If this resonates to you as you reflect on your collection department, consider assigning the top 20% of your customers to a dedicated recovery specialist, which:

  • Builds relationships with your top customers;
  • Focuses time & energy where you have the most risk.

The remaining 80% of your customers can be in an open pool managed by anyone.

Please visit Dynamic Legal Recovery’s website or call us at 877-777-7564 for your complimentary evaluation.

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