Netback is the only true comparison when choosing an agency.
The ‘netback’ is the total dollars realized by the client after subtracting the agency’s fee from the amounts collected. The tangible proof of any agency’s sophistication, effort and management policy is reflected in its ‘netback-to-client’ performance.
Any agency that claims to have expertise in collecting complex high balance receivables should increase the netback as against other agencies who do not have the experience necessary to recover complex receivables. The better the agency, the higher the ‘netback’.
Some agencies attract clients with a ‘low-ball’ rate structure. The rate charged by an agency is irrelevant. What is important is the client’s true realization.
‘Netback’ is the only method of comparison that should be used when choosing an agency.
The following is an example of ‘netback’:
FACTOR
|
AGENCY A
|
AGENCY B
|
| Number of Claims
|
10
|
10
|
| Total ($) of All Claims
|
$100,000
|
$100,000
|
| Agency Fee (%)
|
25%
|
15%
|
| Recovery Rate
|
50%
|
30%
|
| Amount Collected
|
$50,000
|
$30,000
|
| Agency Fee Earned
|
$12,500
|
$4,500
|
| NETBACK |
$37,500
|
$25,500
|
Agency A (with a 25% collection fee) would have remitted to the client $37,500 vs. Agency B (with a collection fee of 15%) which would have remitted $25,500 – a difference of $12,000.