PROFITABILITY EVALUATION: - a Collections Service from the Client perspective
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abcde is an international market leader in consumer credit and risk management services. The foundation of their steady growth throughout the whole financial crisis is partly one of the services they provide; Debt Collections. As an expanding business Abcde need to investigate the metrics behind the profitability of their services, with the aim of creating a uniform standard of estimating the forecasted performance of their services to new prospective clients. The purpose of this thesis is to investigate the profitability of the Abcde Collections Services from a typical UK client perspective. The method can be described as a summative evaluation research and involves the development of a model that describes the costs and benefits entailed by the practice. The outcome of the model is key return on investment measures to describe the profitability. Relevant information, to build the model and then apply it on a typical client, is based on internal business knowledge at Abcde combined with external industry standards and theories of the investment decision through literature studies. The model is applied on a typical Collections Services, with input from internal Abcde statistics and information provided by a client. The validity of the model is to some extent ensured through acceptance by both the lead of Abcde and the studied client. An analysis is made with a sensitivity check to find critical parameters affecting the modelled profitability. The model showed for the specific case that by employing Abcde as part of the client’s Collection procedures will increase the capacity of collecting debt while freeing up considerable resources at the client’s Call Center. The Cost of Collection is almost 40% cheaper using the Abcde approach, which generates benefits in terms of periodical cost savings. In the specific case, the evaluation demonstrate that the Abcde approach would, at no additional operational costs, collect more funds than a human based Call Center set-up. More than 40% more debt would be collected through Abcde. At lower cost of collection, this would generate benefits in terms of cost savings, giving the Abcde approach a profitability index ranging from 400-1000% in the normal case depending on the collection volumes to be processed, resulting in an estimated payback period about 1-3 months. As the model proved extra sensitive to some input parameters, it is important that Abcde shows accuracy in these settings when building a reliable business case for prospective clients.
Place, publisher, year, edition, pages
2009. , 39 p.
ROI evaluation, investment decision
IdentifiersURN: urn:nbn:se:uu:diva-106466OAI: oai:DiVA.org:uu-106466DiVA: diva2:224994
Öström, Bengt, Univ.adj.