Strategic Planning & Analysis Flashcards

Why do collection strategists often discount expected future recoveries to present value?

Answer: Because a dollar collected later is worth less than a dollar collected today

Time value of money means delayed recoveries are worth less, which affects sell-versus-work decisions.

A portfolio of charged-off accounts could be sold for 6 cents per dollar or placed with an agency expected to net 9 cents per dollar over 3 years. What should drive the decision?

Answer: Comparing the sale price to the present value of net agency recoveries and risks

The decision should weigh immediate sale proceeds against discounted, risk-adjusted agency recoveries.

Which statement best describes a collection strategy's 'treatment path'?

Answer: The planned sequence of actions applied to an account as it ages or its risk changes

Treatment paths define which contacts and actions occur at each stage for each segment.

A department's DSO fell from 48 to 41 days while CEI also fell from 85% to 78%. What is the most likely explanation?

Answer: Sales volume changes lowered DSO even though collection effectiveness declined

Conflicting signals suggest DSO moved due to sales mix or volume, while CEI shows true effectiveness slipped.

When setting collection goals, using the SMART framework means goals should be:

Answer: Specific, Measurable, Achievable, Relevant, and Time-bound

SMART goals are specific, measurable, achievable, relevant, and time-bound.

What is the primary benefit of using predictive scoring models in collections strategy?

Answer: Ranking accounts by likelihood of payment to allocate resources efficiently

Scores estimate payment likelihood so effort goes where it most improves recovery.

Which scenario-planning step best prepares a collection department for an economic downturn?

Answer: Modeling higher delinquency and roll rates to plan staffing, reserves, and strategy changes

Stress-testing assumptions lets managers prepare resources and reserves before conditions worsen.