If you want to reengineer or automate your collections process you need to set goals. Don’t be afraid of setting goals that are impossible under your current situation – you need to set benchmarks that are high enough to truly be a reach. Having goals that can be met in a few weeks or month are fine but they aren’t going to challenge you and your team to work towards something that seems unattainable. When ambitious goals are achieved you reap more than just an objective met, your team develops a sense of accomplishment and empowerment that comes from meeting a challenge head-on.
The first place you can look to set some aggressive goals is in the realm of cash flow. Set a goal of eliminating past-due accounts by a significant amount, say 25 percent. The amount should be high enough to get the attention of most people and ambitious enough that it requires some work and planning to attain. Similarly, determine to significantly reduce the percentage of past due receivables – something up to 25 percent will provide a good start. Reducing the percentage that is past due requires giving more attention to the tougher-to-collect debts and creating a better plan of attack for future collection efforts so current receivables don’t go past due. By attacking both the amount of past due receivables and the percentage of receivables that are past due, you can also drive a significant reduction in DSO. The idea is to set broad goals and then align more specific objectives to ensure across the board improvement.
The more contacts made the more receivables will be collected. Look at how you are doing business now and figure out ways to work more contacts into your processes. Automation makes sending emails a cinch without bogging down your collector’s to-do lists. Set a goal with a modest increase in the number of calls but a larger increase in emails that, when combined, roughly doubles the amount of contacts you make with your customers. However, be careful: If you are too aggressive in your contacts, you won’t have the time or manpower to complete the necessary follow-up activities if too many customers respond with queries to your messaging.
These goals are somewhat harder to define since you can’t always assign a quantitative figure to them. The idea is to improve the quality of your interactions with customers, so you will want to focus on response times and accuracy. One parameter you might target is dispute management that could help in reducing your deduction resolution cycle time. You’ll have to overhaul your resolution processes in order to make dramatic time reductions, but the improvements in customer satisfaction will be well worth it. Reducing the number of invoices that are sent out with errors will help forestall payment deductions and so is another way to increase customer satisfaction and improve payment performance. Because the various components of the order-to-cash process affect one another, a positive outcome in one aspect will, in turn, create more positives elsewhere.
When re-engineering your goals there are other factors to consider. Developing attainable goals requires making sure all your team members are adhering to your credit policies. You cannot cut corners and thereby sacrifice compliance on the alter of performance. However, you should be open to changes in policy if the situation warrants. Also, don’t forget to look at the cost of capital and gross profit margins – understand how your collections efforts and any changes therein will affect the bottom line.
What goals have you set, or plan on setting, to automate your collections process?
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.