7 Collections Strategies That Haven’t Aged

What you’ll learn


  • Prioritize collection work-lists to segregate high-value tasks
  • Analyze customer diversity for various payment trends
  • Enhance credit and collections policies
  • Enable early dispute identification and resolution process

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Collections in the B2B Industry

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.

Collections Over the Decades

Collections_over_the_decades

1. Dial-for-dollars

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.

2. Business Intelligence tools

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.

3. Fundamental Collections Automation

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.

7 Best Practices to Fast Track Collections

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.

7_best_practices_collections

1. Know your Customer

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:-

  • conduct specific surveys to narrow down what the customer needs to complete a successful transaction.
  • enable multiple payment options for the customer to pay their invoices on time.
  • come up with a clear road-map for the customer to follow, to complete the transaction.

2. Build a Strong Credit & Collections Team

Empowering the team of analysts with confidence and the right knowledge has its perks.

To realize an efficient collections team, one should:-

  • Teach analysts how to deal with difficult customers properly.
  • Keep the team and stakeholders updated with the latest credit policies.
  • Engage with the staff on a one on one level to review the assigned accounts.

3. Enable a Proactive Collections Process

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:-

  • Communicate with the team on when to begin collections.
  • Create cash application rules for managing short pays/overpay.
  • Utilize ERP collections modules/ collections management tool.

4. Establish a strong Credit & Collections Policy

A well-defined credit scoring model helps in segregating critical customers. To implement a strong credit & collections policy, one should:-

  • Use a D&B report(Dun & Bradstreet) to measure the creditworthiness of a company.
  • Organize regular meetings between leadership and the team to discuss account strategies.
  • Ensure strategic communication with stakeholders to set credit limits.

5. Create a Dispute Resolution Process

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:-

  • Identify disputes early.
  • Capture claim documents into a centralized repository.
  • Prioritize research.

6. Optimize Credit Management

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:-

  • Define appropriate credit limit policy for an organization.
  • Automate credit limit reviews for smaller accounts.
  • Utilize credit reports to manage credit limits.

7. Automate Invoicing and Payments

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:-

  • Digitalize billing.
  • Enable self-service portals for the customers.
  • Facilitate payment portals that could be integrated with any global ERP system.

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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HighRadius Collections Software automates and optimizes the credit & collections management process to improve collector efficiency, minimize bad debt write-offs, improve customer relationships, and reduce DSO. It provides a complete set of tools to optimize and automate the credit collections management process and enable the better prioritization of credit collections activities All the information you need (invoices, dispute information, POD, claims, tracking info, etc.) on each case is automatically presented in a collections work-space and is ready for use. Apart from the wide variety of benefits that it has, it also comes with some amazing features like CADE (Collection Agency Data Exchange), collector’s dashboard which has prioritized collections worklist, automated dunning & correspondence, dispute management, centralized tracking of notes, call logs & payment commitments along with cash forecasting functionalities. The result is a more efficient collections team that contributes to enhanced cash flow and reduced DSO.