Collection Account Prioritization- 5 Best Ways To Get Started

What you’ll learn


  • Top 5 ways Account Receivable (AR) teams could get paid from delinquent accounts
  • Discover HighRadius end-to-end accounts receivable ecosystem for account prioritization

Introduction:

Debt collection is a sad but true reality for most mid-sized businesses. For most SMEs, failure to collect on outstanding accounts receivables can have grim consequences. When customers become delinquent or act like one, the impact of those overdue invoices can and normally are significant.

Finance teams may deploy myriad ways to collect past due invoices, such as phone calls, emails, customer value manager interactions, and site visits. Here are the top five ways Account Receivable (AR) teams could go about clearing past-due invoices from their customers.

1. Compartmentalization or Aging Bucket Creation:

The best strategy to start your day and getting paid faster is by putting your customers into aging buckets on who is the latest past due for 31-60 days, 61-90 days, 91-120 days, and 121 plus days. Work your way backward by reaching out to the customers that are in the 121 plus days bucket. By working down through a list, you are most likely to reach out to most accounts. You can continue down your list until each customer is touched. After reaching out, you can schedule follow-ups to be sure the customer follows up on their promise to pay. Learn more here.”

An aging bucket list helps your AR teams to focus on the riskiest accounts which owe a huge amount but at the same time provides bandwidth to look into those that owe comparatively smaller invoice amounts. As it is evident from the above passage, an AR employee can start his day by calling and proactively reaching out to clients or accounts in the highest overdue days bucket and work downwards. This will ensure that accounts in the other buckets are followed up by your AR team as well.

2. Contact Strategy:

“This strategy involves making customer contact include email, text messaging, posted letters, and telephone calls. In recent years, successful collectors have been using a range of proactive correspondence tactics. A customer is much more likely to act on a phone call than they will to an email. So, when should you make a phone call and when should you be sending out emails? You should prioritize emails to be going out to those who have the least amount of days past due on their account. These are friendly reminders to make a payment on their account as soon as possible.” Phone calls could be made to the accounts in the above 120 invoice overdue bucket.  Learn more here.”

When it comes to a proactive correspondence strategy, you need to pay attention to the nitty-gritty. In the corporate world, reaching out to delinquent accounts involves calling through mobile phones rather than a landline. You need to know that nowadays collection companies strictly adhere to call monitor regulations and screen live calls. This guideline is making brute force dialing at all hours of the day, less effective. Research shows that by balancing the intensity of the calls and using self-service portals, your AR teams can create a more engaging customer experience. Finance teams have observed that when customers discover a sense of empowerment, they are more likely to pay through their chosen contact channel and within their chosen timelines.

3. Use Of Analytics In Prioritization Of Debt:

 “Analytics and credit-based data sources provide some of the most robust forms of predictive information that can be applied to the collection. For example, prioritization and analysis, proven-credit recovery models, credit data, event monitoring, and predictive characteristics, help debtors make more informed decisions on the treatment strategies of their portfolios. This can mean saving thousands of dollars simply by determining the best collection strategies before taking action on an account. This type of analysis and simulation exercise provides insight into which accounts to focus on first – ones that will generate the greatest liquidation rates. Learn more here.”

These credit-based analytics capabilities help to make informed business decisions to kick-start recovery efforts even before the first letter is mailed or the first phone call is placed. There is no shortage of financial intelligence to be used in the collection effort by mid-sized companies. However, knowing how to leverage the insights is key to success.

Collectors need to make sense of the information for making informed decisions and build strategies by using analytics and information (contact data, recovery score, and credit attribute). These strategies will form best practices which in turn will help achieve a competitive edge.

Besides, collectors can use credit-based analytics to monitor debtor’s financial status and accordingly determine the appropriate strategies to be deployed, thereby positively impacting the bottom line.

4. Charge Interests and Late Fees:

 “The rules vary from business to business, but if you are allowed to charge interest and late fees, you definitely want to do so as partial compensation for your aggravation. However, you are going to want to make sure that you are well within your legal right to do so before adding the charges. Learn more here.”

You held up your end of the bargain- rendering services or delivering goods in the quality and quantity agreed upon and within the specified time. Now if your customers are ignoring proper invoice settlements, they are inadvertently or deliberately impacting your cash inflow and account receivables. To avoid this awkward situation, your AR team is well within its right to levy interests and late fees against the past-due invoices. This will put forward the right impetus for your clients to pay their invoices on time.

Two things here your AR  needs to make sure of. Firstly, they do so within the bounds of the law. Secondly, make sure your AR team does not charge more than 10% interest annually and offer a discount on the full payment if paid within the timelines. After all, incentives can convince customers to pay their past invoices better than threats can.

5. Treatment Choice:

Rising delinquency rates strongly correlate to the rising proportion of customers who are unable to make full past-due payments and who may ultimately default. For lenders, it is essential to identify these customers early and offer them a range of treatment solutions. Many issuers reduce interest or extend the term of delinquent debt to make monthly payments more affordable. More advanced collections operations will offer customers the opportunity to name their own price. Learn more here.” 

This approach will enable default customers to set up realistic payment options and help them to distance themselves from the delinquency category. Some AR teams have gone ahead with developing advanced behavioral models, enabling them to identify customers who may not be able to clear invoices within the timelines. These could be presented with those clients accompanied by some of the advanced payment options discussed above.

How RadiusOne helps

Introducing RadiusOne AR Suite For Account Prioritization

With a prioritized worklist driven by collections strategies trusted by the pioneers in the industry, readily available backup information, and automated dunning correspondence, collectors are able to contact more accounts and centrally track collections activities for proactive review and follow-up. A quick walkthrough of AR automation solution for mid-market.

HighRadius’s RadiusOne AR suite gets you up and running in just 28 days. Learn more about our e-invoicing and collections app to kickstart your growth.

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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.