The Collections system is a function of Accounts Receivable. It is the recovery of cash from a business or individual for an invoice.
A business aims to collect all the outstanding invoices before they become overdue. Moreover, the team focuses on preventing receivables from aging and mediates a method of fast-tracking the resolution.
Before the inception and localization of technologies such as excel, collections were entirely manual and the AR accounts had to be filed into reports and printed out once a month. The analysts had to manually call every single customer who had an outstanding payment. Hence, the term ‘Dial-for-dollars’. The only means of communication was calls. As a result, the whole process became time-consuming and taxing on resources.
During the 90s, there came a digital revolution that improved collections processes. Excel and spreadsheets came to the forefront of all the operations and the analysts could now slice and dice customer data into smaller segments. These segments could be easily used by analysts to filter the right person to contact for a successful collections.
These technological advancements saved a lot of time and effort. However, the analysis was primarily manual and left a rather large scope for improvement.
The next wave in evolution came in the form of automation. Automation paved the way towards a collections system that was efficient and time-saving. There was a seismic shift in the mode of correspondence from calls to emails. Now, the system could generate a prioritized worklist on whom to contact and suggest actions on how to collaborate with customers. Automated Dunning (reminder for payment) was another great feature that greatly enhanced efficiency.
With automation under the hood, collections as a process has improved by leaps and bound. However, there are some evergreen collections best practices that could help teams enhance their productivity and efficiency.
The foundation of a strong collections process lies with the customer. An efficient collections process should be customer-oriented.
To understand a customer base, teams should:-
Empowering the team of analysts with confidence and the right knowledge has its perks.
To realize an efficient collections team, one should:-
Being proactive means to be in control of a situation and acting accordingly rather than responding to it after it has occurred. The collections process is dynamic and teams should always be ready for unforeseen circumstances.
To make the collections process proactive, one should:-
A well-defined credit scoring model helps in segregating critical customers. To implement a strong credit & collections policy, one should:-
The Dispute Management System (DMS) is a communication process that helps organizations manage inquiries, complaints, and disputes among themselves, fairly and effectively. Disputes could turn into massive hindrances if not resolved swiftly. Therefore, collections systems are dependent on the timely resolution of disputes.
An effective dispute resolution process should be able to:-
The Credit Management function incorporates all of the company’s activities aimed at ensuring that customers pay their invoices within the defined payment terms and conditions. Effective Credit Management serves to prevent late payment or non-payment.
To optimize credit management, one should:-
Automation has become the cornerstone for collections. Automating invoice and payment unlocked several new features that made the collections process more efficient.
In order to automate invoicing and payments, one should:-
Collections at first look can be very daunting and without the right data, it could be a huge challenge. Learn more about these strategies that could effectively boost the collections system.
Automation along with these key strategies could surely change the collections game for good.
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