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November is upon us and Thanksgiving is just around the corner. So, while you celebrate the joy of giving, the real celebration for your company is when you start receiving, and by receiving we mean collections! However, receivables collection is not only one of the most critical functions but also stressful, as it is discomfiting to remind somebody about the payment they owe to you or your business.
Collection specialists use a combination of channels including emails, phone calls, and third-party agencies to ensure that payments are collected against all open invoices. Today, technology solutions such as collections worklist prioritization help collectors make the right decisions when identifying and reaching out to these different customer segments.
Empowering your collections team with adequate training on negotiation skills, collection policies, and other best practices can make collecting accounts receivables less taxing. Hence, in the true spirit of Thanksgiving, we bring you a 10-point collections plan that will set you up for success.
Just as you can’t cook without salt and similarly, you can execute a seamless collections strategy without proper customer data. Having all information about customers, their payment statuses and trends, as well as their financial health is important to ensure successful payment collection. Having accurate customer data at your fingertips ensures successful client conversations devoid of any confusion or misleading info. Accounts receivable automation software helps you store all customer information in one place as a single source of truth. You can search the records for individual customers and filter by payment status, purchase details, etc. when contacting them for payment collections.
Your guests may have varied taste buds, and understanding their preferences could help you add variety to your menu. Replicating this best practice for your customers can help them as they can fail to pay because of cash woes, or their sales might be bad or it might be a dull season. Check if restructuring their payment plan (e.g. making it Net45 instead of Net30) will help them. Or ask if they’d be able to make part payments or split payments. Your goal should be to get your due amount without affecting customer relationships. Putting too much pressure on a financially stressed customer to pay the whole amount immediately may even lead them to become delinquent, which is not in your best interests.
Receivable collections are interrelated with other AR functions like invoicing and cash application. For faster collections, you must send customers invoices as quickly as possible. Also, make sure that the invoices are error-free. Wrong invoices delay collections. Adding payment links within the invoices helps make collecting accounts receivable faster. Our survey of over 150 mid-market CFOs revealed that sending invoices immediately is the measure that most CFOs (37%) plan to take to improve cash flows.
A large percentage of invoices are delayed because customers inadvertently miss the due dates. Sending reminder emails and push notifications on their AP portal can help customers remember to make payments on time. Use AR automation software to send reminders to clients at predefined intervals (e.g. a week before the invoice is due, 1-3 days before the due date, etc.) Depending on your relationship with the client and the industry and geography that you operate in, you can also call the customer quickly for a friendly reminder. Reminder and dunning emails with payment links embedded in them are known to work better in collecting accounts receivables.
Check out RadiusOne eInvoicing app to embed payment links within your invoices and dunning emails.
A nice pizza in the refrigerator always comes in handy in case you toast your turkey :-). Preparing for eventualities helps you manage tough situations better. Payment collection is closely associated with customer credit risk as well. The higher the credit risk score of a customer, the more difficult it is likely to collect payments from them and vice-versa. Along with sending invoices immediately, 37% of respondents are in our AR dashboard, and prioritizing your worklists is important to ensure timely collections. Our AI-assistant Freeda can help you prioritize accounts and improve your AR operations and collections.
Having a written document that outlines the steps involved in collecting accounts receivable will help your collectors follow company-wide standard procedures when reaching out to clients for payments. This document can outline when to send a dunning email, when to reach out to customers by call, and how to start a collections conversation. It may also include templates they can use for their emails and calls. Having a documented collection procedure helps train and onboard new staff easily.
Collecting accounts receivable is no easy job. You have to walk the tightrope between maintaining customer relationships and ensuring cash flow. Training your employees on various skills such as negotiation, clear communication, ethics, and persuasion becomes important to ensure strong collection and customer relationships.
Collections activities do not mean using threatening language on your customers. Collectors should be able to empathize and have polite conversations with clients. Understanding the reasons why customers aren’t able to pay on time (e.g. insufficient cash flow at their end, problems with the bank, issues with the product, etc.) will help build strong and long-lasting customer relationships. At the same time, collectors also need to deal sternly with customers who give unreasonable excuses. Even then, ensure that you do not jeopardize relationships or hurt the reputation of your business.
Empowering your AR team with the right tech tools is crucial to help them complete their tasks efficiently. AR software helps your team manage invoicing, cash application, credit risk, and collections electronically. It improves collaboration between teams and automates mundane tasks such as invoice preparation, report generation, etc. It enables your staff to focus on higher-end activities such as building strong customer relationships, solving complex disputes, and identifying trends and patterns in customer behavior.
To be a successful organization today, you need to consider your collections activity as a customer service measure rather than as a means of customer intimidation. Studies show that it is 5x more expensive to acquire a new customer than it is to retain an existing one.
With choices in the market galore, you need to ensure that your teams, including finance and AR teams, provide exceptional customer experience at every touchpoint including when seeking payments.
According to our report, 52% of finance leaders measure the ROI of their digital transformation initiatives by tracking improvements in customer service metrics. For 86% of CFOs, implementing AR automation is important to keep pace with competitors. Falling behind in adopting AR technology leads to customer frustration (42%) and competitors providing superior customer experiences (41%).
Investing in an AR solution gives you the necessary data visibility and features such as worklist prioritization, in-app VoIP calling, and automated dunning to improve receivables collections. AR solutions work in tandem with your other systems such as ERP software or accounting system to create and send invoices, apply incoming cash to the right invoices, and track key metrics such as days sales outstanding (DSO), accounts receivable turnover ratio (ART), days deduction outstanding (DDO), receivables at risk, and collections effectiveness index (CEI).
A Thanksgiving dinner isn’t complete without these key elements, and our year wouldn’t have been complete without sharing these collection tips. Use all the above ingredients, and the right cutlery to automate your invoices, collect them efficiently, and boost your cash flow for a perfect thanksgiving this year.
Also, we at HighRadius offer affordable, easy-to-implement, and intelligent AR solutions for businesses to meet their receivable goals. Clients such as ShurTech have seen a 75% improvement in their collection metrics (DSO) post-implementation of our solution. Take a demo today to see how our solution works.
Automate invoicing, collections, deduction, and credit risk management with our AI-powered AR suite and experience enhanced cash flow and lower DSO & bad debtTalk to our experts
HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.