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Using AI and Customer Profiling in Collections – The Mercury Marine Hack

What you’ll learn

  • Learn the strategic benefits of profiling customers into risk buckets on the basis of their credibility
  • How to implement AI in Collection Management through 7 steps
  • How to enhance customer relationships for Collections by leveraging Automation

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    Mercury Systems, Inc. is a multi-million dollar company assisting the aerospace and defense industries. Headquartered in Andover, Massachusetts, their procedural subsystems are used in Intelligence, Surveillance, and Reconnaissance (ISR), Radar, Electronic Warfare (EW), storage and guidance defense utilizations. With more than 1000 employees in offices around the globe, Mercury has an annual revenue of approximately US$493 million.

    Customer Relationships- Why Bother?

    Due to the lack of a stable and reliable system, a lot of companies often lose a lot of customers. In business, customer relationship is a critical asset. Not only does it boost your value in the market, but also ranks you up on the loyalty scale.

    Collection Landscape

    Customers come from the varied reality of payment cycles, so why should the collection strategies be ‘one size fits all’? The collections team at Mercury Marine was a part of this hassle and moreover, they were not able to influence their customers to pay on time. 

    There are a multitude of reasons why customers don’t pay. Some common reasons include cash crunch or financial duress, pending disputes, and unreceived invoices. 

    Risk Classification Based on Payment Trends

    The team at Mercury faced similar challenges. What did they do? They bucketed their customers into three categories-

    • Low Risk- Customers who typically pay on time 
    • Medium Risk- Customers who need some reminders for them to make payments
    • High Risk- Customers who pay late or are inconsistent

    Customer Risk Bucket

    Fig. 1: Customer Risk Buckets

    The primary challenge was how to get customers in the high-risk category to pay. Some strategies that helped them included – 

    • Taking collateral which is lien over their property
    • Payment commitment for a later date
    • Leveraging credit and next order as an incentive to make payments
    • Establishing ‘more-than-just-business’ relationship with customers and work as partners to sort through open invoices

    These strategies were actionable, however, executing across the board meant analyzing thousands of customer trends and formulating the collections plan for each of them.

    Tailor-Made Strategies for Risk Buckets

    The collections team needed a clear perception of customers’ payment behavior. A solution that could segregate the customers into logical risk buckets and record tailored rules and regulations. Ultimately making the analyst’s work easier and more efficient. This birds-eye view of the entire Collection process could effectively nurture customer relationships while having effective control over the entire payment hierarchy. 

     Mercury Marine invested in a long term scalable solution that helped them segregate customers based on the risk, tailor strategies for different accounts, centralize all information and enable collectors to focus on correspondence.

    Different customer risk category and their correspondence structure

    Fig. 2: Recommended actions for different customers

    Key Features

    Some key features of the solution included :

    Collection Strategies and Rules

    Based on the type of customers that the company would have garnered over the years, they can be segregated into specific logical buckets. Furthermore, collections strategies could be set up for each category.

    Prioritized Worklist

    This prioritized worklist was automatically created by an automated system based on account segmentation and the strategies identified for each segment.

    Automated Correspondence

    Correspondence is the most critical part of collections. Automating correspondence for low-risk customers was a low hanging fruit for the collectors, freeing up their time to focus on high-risk customers.

    Log Calls and Notes

    The solution came with an ability to log notes and keep track of all communication making it easier to revise the collaboration history before initiating the next correspondence with the customer.

    Track Payment Commitment

    Keeping a track of the customers’ payment commitment especially high-risk customers can be a burden on the collectors. Auto-reminders in the solution supported the analysts in keeping track of payment commitments and follow-ups.

    How Automation Transformed the Collections Process
    Fig. 3: Steps involved in the collections process

    Results Across the Board

    You must have heard about the 80/20 rule of business, 20% of the customers account for 80% of the receivables – but not all risk is equal. At Mercury Marine, it was difficult to track high-risk customers (the rest of 20%) as well but with an intelligent solution, they were able to focus on these critical accounts while ensuring that the medium to low-risk accounts did not fall through the cracks.

     From a manual, time-consuming and error-prone process, the team at Mercury was able to scale its collections process with an AI-enabled collections management solution

    Mercury Marine Collection

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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.