20/80 Rule In Debt Collecting – Pay Attention

“Discipline is not the cage, discipline is the key.” – Denver M Lane 

Debt Collecting Techniques

Have you ever heard of the 20/80 rule?

It is basically a rule that shows that eighty percent of the output comes from twenty percent of the input.  This is the Pareto Principle, or as it is more commonly known, the 80/20 Rule.

It has been proven over and over that the rule DOES work. In business you get 80% of business from 20% of clients/customers.  The rule also doesn’t fail in debt collecting – 80% of your debt collections come from 20% of your clients/customers.  If you are not convinced, just do your debt collection analysis for the period of the last 6 months and you will see the pattern appearing and working.

How to knowingly start using the 80/20 rule in debt collecting?

  1. Focus your energies on what is the most important goal/task.
  2. Identify the 20% of your clients/customers that make 80% of your debt collections.
  3. Concentrate on attending these accounts as a priority as they produce most of your results.

However, what happens to the 20% of outstanding smallest accounts?  Do they get neglected as being ‘less significant’?  “Not significant” term does not exist in debt collecting.  Every dollar that is outstanding should be attempted to be collected. These small amounts do add big in total and over time.

  1. Use ‘helpers’ like a functional credit collecting system to collect the smallest 20% of outstanding debt (properly created invoice with ‘call to action’ to pay on the front page, regular statements, emails, SMS reminders).
  2. Allocate 20% of your available time to specifically target these “less significant’ accounts receivables on a regular basis.
  3. Repeat the process monthly and you will notice that this ‘non priority’ list of collectable accounts is shortening.

If you are still not convinced, still, give it a go for one month and monitor what happens to your debt collecting. The results just might make you repeat it the next month!

One thought on “20/80 Rule In Debt Collecting – Pay Attention

  1. I’m still studying the debt collecting craft. I definitely love your tips and instructions written on your blog. Maintain the tales coming. I cherished it!

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