Want Efficiency? Clear Up Your Collection Bottlenecks

What you’ll learn

  • Learn 5 Best Practices to enhance your Collections Process.
  • Clean up your Collections gridlock by reducing bad debts.
  • Improve your Account Processing to boost your Collection Team’s effort.
  • Learn more about Collection Processing Trends that mirror the changes taking place in your O2C.


Bottlenecks are caused when a credit department is unable to handle small problems quickly and efficiently while still managing to provide full service to the most important customers. When this happens, overall performance drops. Time is wasted putting out fires instead of focusing on where the big money is. A bottleneck is any activity that provides relatively small returns for the amount of time it consumes. Bottlenecks are often repetitive and clerical in nature, making them prime candidates for an automated solution. Even if you choose not to fully automate, there are still steps you can take to overcome system bottlenecks by either eliminating the cause or at least taking steps to minimize the impact. Five common bottlenecks and ways to handle them are outlined below: 1. New Account Processing is time consuming due to the need to gather information, check references and analyze all the data. Instead, rely on credit scores for accounts that will be ordering small to moderate amounts. Used properly, credit scores can provide greater predictability of delinquency than manual credit analysis. They also save money, as credit bureaus generally charge less for the score than a full report – in addition to the overhead reduction from streamlining your new account processing. 2. Order Approvals also deserve close scrutiny. If past due customers are not being contacted because they don’t show up in a collection work queue, you are creating a bottleneck. Likewise, if you set your credit limits too low. Obviously there is a point where orders must be held up due to slow payment or excessive exposure, but many organizations set the bar so that too many orders are held that are subsequently released without any further action. That’s a waste of time and resources. Appropriate credit limits and automated release mechanisms that address your most common contingencies address this issue. 3. Small Dollar Collections is another area where a large percentage of customers who need to be reached can overwhelm your staff and distract from more important issues. Fax and email are by far the most effective ways to reach these accounts – ideally en masse with an automated solution. Also, don’t let collectors get mired in these tasks. Use the administrative staff to handle this correspondence or consider outsourcing. Lastly, don’t bother chasing the small balances that are likely to self-cure (in other words those that have a history of paying slow but still within a reasonable time frame). 4. Deductions, first and foremost, must be isolated from other collection activities. Unmanaged, they can consume an inordinate amount of your resources. They need to be separated and identified by type and then quantified so management can work out a better dispute management solution to counteract their impact and prevent their recurrence. 5. Un-reconciled Items will also muck up the works if allowed to fester on your books. Partial balances and unapplied credits and debits can cause otherwise good accounts to show up in the credit hold queue. They can also cause confusion and detract from the real issues. Periodically sweeping this AR junk away will make your collections activities substantially more efficient. There are a plethora of other activities – tax certificates, reference requests, status reports for sales and managements, proof of delivery and other documentation scenarios that can pose bottlenecks. Once you address your organization’s biggest bottlenecks, re-allocate the time saved to increasing collection efforts. Every incremental improvement will free up more time and produce performance improvements. Eventually, your past dues will diminish, bad debts will decrease, and fewer orders will bounce into credit hold allowing for greater focus on the big accounts with the most cash.

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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.