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Don’t Commit these Collection Automation Pitfalls

What you’ll learn

  • Discover about Collection re-engineering in A/R space.
  • Learn 4 pitfalls that affect Collections.
  • Examine ‘Dunning’ and it’s integration in A/R.


Collectors deserve automated collections management systems that provide considerably more collection capacity than afforded by manual systems. Misguided system improvements, however, can render an automated solution ineffective. Such improvements typically revolve around trying to find a “quick fix” rather than a comprehensive solution. Lacking process re-engineering, only incremental improvements are achieved, instead of the dramatic performance enhancements required. Ideally, the goal is to eliminate low value-added processes that take up more than their fair share of time. Simply automating manual processes is not the way best-in-class businesses operate. These companies streamline activities and generate measurable data on speed, accuracy, and reliability to improve existing systems even more. The following four pitfalls demonstrate how low-impact improvements can actually weigh down the overall collections process:

Pitfall #1 – Relying on Simple Dunning Notices

Mass-produced dunning notices will provide meager benefits if they are not integrated with the AR system. When they don’t take into account discrepancies and other existing issues, dunning notices tend to create more customer service issues than collections as annoyed customers request their accounts to be reconciled. Likewise, monthly statements: when large numbers are sent out early every month to customers that don’t pay from statements, the effort spent can take away from more critical collection activities.

Pitfall #2 – Not Linking Follow-up Activities to the AR System:

You must have all your systems in sync with each other, or you might as well go back to paper processes. A tickler file that isn’t automatically updated when invoices are paid or credited isn’t worth a hill of beans if a collector has to go back and forth between their online calendar or task manager and their AR system to update items that no longer require attention.

Pitfall #3 – Failing to Code Disputes:

When disputed items are not identified and coded properly, customers can get flooded with repeated dunning notices especially when the AR system and the mass dunning service aren’t in sync. This creates redundant efforts and wastes money for the collections team, not to mention it annoys customers.

Pitfall #4 – Failing to Integrate Reporting:

Collection activities are usually reviewed in conjunction with the accounting cycle and are therefore affected by month-end closeout activities. If invoice, payment and risk data isn’t linked into the reporting system, the compilation of these monthly reports can take more time than necessary and thereby puts collectors behind the curve as they struggle to achieve their goals. As an example, let’s take a closer look at Dunning Notices. There is no strategic advantage to mass dunning if all it does is send the same letter to every past due account only because they are past due to the same number of days. Some of the major issues are:
  1. Many customers purposely pay 15 or 30 days late so dunning notices sent “on time” are largely ignored.
  2. When a customer has made partial payments or indicated a problem with outstanding bills, repeated dunning notices could be annoying.
  3. Mass-produced dunning notices don’t always take into account multiple invoices within a date range, thus producing multiple notices and flooding the customer’s inbox. Also, they often contain less supporting information than a customer might need to resolve the problem.
  4. Dunning notice services don’t always send out notices with timely information due to the fact that you turn over account information only periodically (once a month for instance).
Dunning needs to be tightly integrated with what is presently transpiring in the AR, not based on where things stood at the end of last month. When dunning is integrated it can be more targeted to the collection circumstances at hand and therefore generate better results. Throwing a lot of notices at customers is often counterproductive. A targeted approach to dunning incorporated within a strategic collection framework will prove to be much more cost-effective. The same holds true for the generation of the collector’s task list and reporting – integrated systems are key. Have you struggled with automating your collection processes? If so, what have your struggles been?


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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.