Modeling Recoveries of Post-Chargeoff Receivables
Recovery managers are facing increased pressure to contribute as much as possible to the overall financial performance of their corporations. To maximize recoveries, these executives closely track their collection performance through data analysis, and most employ recovery models to guide their strategy. This generally involves analysis of the NPV (net present value) of the debt charged off. Credit issuers that have designed and utilized such recovery models are best equipped to limit bad debt expenses in the current recession. |
As a leading advisor to credit issuers and their service providers in the field of receivables management, Kaulkin Ginsberg maintains an in-depth, practical knowledge of successful recovery strategies (more about our credit issuer services). This executive brief examines the characteristics of successful recovery models and suggests ways they are changing in light of the recent shift in the economy.
How recovery models utilize NPV (Net Present Value) of debt charged off
Calculations of net present value are the foundation of modern financial analysis. Recovery models utilize NPV in much the same way as other financial models do for such pursuits as evaluating capital expenditures or assessing a stock, for example. Calculating the net present value of debt charged off allows recovery managers to forecast future cash flows based on expected performance. Download our recovery models report and discover the ways in which NPV can be used to guide business decisions regarding recovery strategy.
Testing the strategies for validating Net Present Value of debt charged off
The assumptions incorporated into these recovery models have a direct impact on cash flow forecasts and the resulting strategies used to manage the debt charged off. Accurate recovery models need to constantly test these assumptions. Download our recovery models report and learn how the variability of assumptions can impact the accuracy of cash flow projections, and recommended testing strategies for supplementing net present value analysis.
How use of recovery models supports short term vs. long term liquidation strategies
In the current environment, many recovery managers are looking at debt sales as a way to bring cash flows forward. Despite intense financial pressure, we believe that not all debt sales are wise, however. Download our recovery models report and learn how functioning and evolving recovery models can assess the right strategy for liquidating charge off debt.
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