Receivable/Accounts - Information for Credit and Collection Issues

Friday, June 11, 2021

Targets, Goals and Feeling Good About It


Yesterday was the 7th business day of the month, with a total of 22 days this month.  Like many other collection agencies, we set a target for the company, and for individual team members to make up that company target, and break it down by business day to see if we are ahead or behind where we should be at this point of the month.  Yesterday, five of our collection team members have already hit their monthly targets.

Now many collection managers would be pulling away from me right now, saying ‘that means your targets are way too low’!  I beg to disagree. 

 target, by it’s very definition is something your company looks to achieve.  Many collection agencies set unachievable monthly targets for their company or their staff, and it’s a bad idea.  Let’s talk about why that is.

Who Sets The Target?

Well, it’s a bit of a tug of war from everyone – the agency needs to set a target to cover costs and make a reasonable profit margin.  Files assigned by the creditor might come with an expectation from them on long term liquidation or monthly gross collections, and targets might be set based on what staff need to achieve to meet a bonus or commission scheme.

 set my targets based on revenue, not gross collections.  For a new, inexperienced staff member in their first month I might set a target of $2000.  For someone up to speed, I would set their target at $6000.  For staff with wildly high historical revenue or higher salaries (which carry higher commission targets) I might go as high as $9000.

ow, to any large agency or agency that deals with commercial accounts, they will think that’s ridiculously low.  But it’s not – here’s why.

he target or goal of any company is to be profitable.  Now, it doesn’t matter if you set $10,000 goals for your collectors, but you run a 5% profit margin because you are top heavy with executives, sales managers, software licensing costs, etc … what matters is breaking down your base cost.

ince our company’s base cost per collection team member is about $4300, and we carry about 10% of our overall employees are non-collectors, that means we should generate about $4800 per staff member to just break even.  Add in unexpected but necessary expenses and a target 15% profit margin, that’s about $6000 per staff member.  And that’s our target, and what we model our business on.

Obviously as we over-perform on our team members, our costs go up as we have commissions and bonuses to pay, but ultimately, we could run a profitable company if everyone did $6000.  Now if someone consistently does $17,000 per month in revenues, I might increase their target slightly, to $9000, but not any higher.

The Emotional Side of Targets

If someone misses their target, they can feel like they failed – failed themselves, failed the company, what have you.  That’s not ideal.  If you set a target of $10,000, and the staff member does $8,000, still receives a bonus and the company still has a profit margin in there, why have a mechanism in place to tell them ‘not good enough’?

 can tell you, the folks who have already hit their monthly target are still striving to do better, but they feel confident, relaxed, and hopefully valued.  You want to set targets that everyone can exceed.

If 70% of our team hits their personal targets every month, and the company hits their overall target 95% of the time, that gives us a solid baseline to plan for the future, and tell everyone that we're okay, and the company is in good shape.

The Math Side of Targets

So, I’ve seen many agencies tie commissions for collection agents to targets – and that’s a terrible, terrible idea.  Because targets can be arbitrarily set each month, that means a manager on a whim can affect someone’s take home pay.  I’ve always believed that targets should be tied to a percentage of salary – it’s consistent, and won’t skew too far from costs.  As well, we use a tiered commission rate, so the higher the percentage ratio of revenue to salary, the higher percentage the collection staff receive as commissions, so it builds a reward that’s commensurate with success.

Yes, the math of what clients expect is part of things, but it should only influence targets, not set them – if a client sets a target and you have to throw 100 collectors at it to hit that goal, and you aren’t running a profit, that’s dangerous.

Now, you can look at the number of files a collector can handle, the average balance, the contingency, and the expected liquidation, to figure out a baseline client expectation – but that should set up the process that a collector can follow, not just be dumped on the collector to figure it out.

Example #1: Small Balance Canadian Hospital Accounts – 300 files x $45 avg bal x 25% contingency x 30% liquidation = $1012 revenue.  You can’t possibly have a collector manually collect on just $45 files and succeed.  You need to give them SMS notices, mailed letters, emailed notices and web payments for them to increase the number of files worked, or payments on accounts they haven’t even touched (see my other blog on how house payments are stupid).

xample #2: Fitness Accounts – 300 files x $600 avg bal x 28% contingency x 20% liquidation = $10,800 revenue.  That’s more like it.  If a client demands 25% liquidation, you can assign more bodies, pay for more trace tools, review or rework uncooperative or avoids contact files, and still be profitable.

t’s unlikely to ever have a huge volume of high balance accounts with high commission and high liquidation all at the same time – usually you will only get a good 1-2 values, and you have to compensate the other 2-3 to make a winning formula.

nd when in doubt, remember there is a math to targets, but it doesn’t hurt to influence it with human behaviour and treat it a little bit like an art form.

More Than One Level Of Target

So you can have a single target as a pass/fail, but I always believe in being transparent, so not only do I set a target, I share with our team our overall overhead, so they can see if they miss target by a bit, but other members of the team hit or everyone’s just a little shy and the company meets costs, yes it’s a shortfall to what we wanted to do, but there’s no danger – there isn’t that Sword of Damocles hanging over their head where they think the company is in trouble or their job is in jeopardy.

When Things Go Wrong

Let’s face it, any collector can have a bad month.  On high balance portfolios, a successful month might be 30 payments, and if 5 go sideways, it can equate to a missed target.  And outside influences can affect performance – down time, less working days in a month, clients failing to list accounts, or accounts being listed with bad or missing data.  Our company has missed it's target once in the last three years -- but it wasn't the end of the world.

ow, people who set the targets can start yelling and throwing things, or they can make a change – what we do is if a collector starts falling behind 3+ days to their target, we try to drill down and see if they need help – we’ll audit their KPIs, their calls, and the quality of their business, before things get worse.

nd at the end of the month, if we haven’t succeeded to the level that we wanted, we have an end-of-cycle retrospective scrum meeting or report to review what went wrong and what we can do about it.

When Things Go Right

This is the most important thing – you want to succeed.  You want your collectors to succeed.  You want everyone to be high fiving each other in the halls (when such a thing is allowed).  When your company breaks through targets this is the moment you can set up your company for future success.

irst, don’t just raise targets for next month!  That’s telling staff that yes, we did reasonably well this month, but it's not good enough, this month’s success was temporary, and whatever they did, they need to do more of it to meet expectations.  If you are running a 20%+ profit margin (which in collections, is pretty healthy) then those targets are more than sufficient, and let the team members bask in their success.

ext, have an end-of-cycle retrospective scrum meeting and go over what went right – what can you duplicate for future months?  Discount the big payments that fell from the sky, or the lucky breaks – look at the repeating processes, the lower balance payments, what can be bottled and done again.  And in that meeting, ask your team members what can be done with any company profits to make the company better.

nd lastly, make sure you are rewarding your staff – if your commission or bonus scheme breaks because someone had a monumental month, make sure you aren’t coming across as a selfish company owner or manager, who drives a fancy convertible sports car to work after a great month, and leaves everyone who did the hard work at the same wages, with minimal bonuses, or without even some appreciation and gratitude.  That is not just buying them lunch -- really, do something meaningful.  Increase health coverage, give large bonuses across the company, hand out raises to everyone if you've wildly exceeded targets several months in a row.  Show them through actions their team successes will feed back to them.


As we speak, we are an unheard of 7+ days ahead of target for the company, from a combination of some process changes, some new clients coming onboard, and more than a few lucky breaks.  I can tell you that for June 15th, we did some spontaneous bonuses over and above regular commissions from our May revenue, and we’ll likely be doing it again at the end of the month.  We are paying attention to what is going right, and we are asking the team members what we can do in July to make it like June.  And we’re being clear that we are succeeding because of their efforts.

ot any questions about targets?  Drop me a line, happy to chat.

Thanks kindly,

lair DeMarco-Wettlaufer
INGSTON Data & Credit


  1. Nice detailed article! what I see is someone achieves target and the next month it's up. The only thing appreciated with is a lunch as you mentioned and no wage increase and the same crappy bonus. Also, if you ask about the increased target but same low wage and bonus, all you hear is being lucky to have a job in this present situation. That is disrespecting the employees

    1. Totally disrespecting the employees! I've worked as a collector in that kind of environment ... it's soul crushing. Hope you find a company that will appreciate you!