This e-book, with research on more than 500 receivables projects, concludes that credit and A/R leaders are more likely to positively impact A/R KPIs if they start with an assessment of their collections operation maturity on 5 key parameters -people, processes, data, collaboration, and technology. The Collections Operations Maturity Model has been devised to help finance decision-makers perform an in-depth evaluation of their current operations and identify clear next steps to advance up the maturity pyramid.
The collections process is no mean feat. Growth in businesses, through organic and inorganic expansion, has only meant more demand. This has led directly to more transactions with an ever-rising number of customers. The collections challenge is clearly not going away. A great deal of insight into the future of collections management could be gained by looking at how the collection process has matured over the years based on the key success factors. The rest of this section discusses how the top 5 success factors affect processes in the collections maturity model.
The collections maturity model consists of the evolution of the collections process from an ad-hoc process to a reactive process into a preventive process and finally into a proactive process. The rest of this section explores these individual process level details.
Ad-hoc processes focus on the people part of the operation. The most obvious solution to increase the collection output for teams following this process is to increase the number of resources deployed in the collection process. There is little emphasis on improving the actual collection process, improving collaboration or leveraging technology to eliminate the dependence on human resources. Every aspect of collections right from preparing a worklist, contacting customers to reconciling cash is manual. The analyst is the one who is in charge of deciding who to contact and how to contact and the entire collections process is dependent on the skill, expertise, and decisions made by the collector. The process overview is given below: The following explores how the ad-hoc process defines the 5 key success factors:
In this process, some ground-level standardization is adopted into the system. It focuses on the process itself. This helps the collectors to design and define the process flow, however, it is limited to ensuring that the collectors have a ?basic? outlook on the statuses of different customer invoices. This process is the root level standardized and in the absence of a system, organizations depend on individuals to implement credit and collection policies. The process overview is given below: The following explores how the reactive process defines the 5 key success factors:
A preventive process starts focusing on data to drive decision making in the collections process. This includes generating prioritized worklists for the collectors. This process also leverages information from other creditto-cash processes and includes that information to drive collector activity. It also uses technology for automating clerical tasks such as dunning correspondence. The system uses credit policies and other factors to generate worklists and suggests actions for collectors about customer correspondence. While the collections process is largely standardized, the process is still mildly dependent on collectors and the collections team chases only past-due A/R. Collaboration with buyer A/P teams is still manual. The following defines the process: The following explores how the preventive process defines the 5 key success factors:
Proactive Process focuses on leveraging people, process automation through technology and data, for decision making and easy collaboration with other credit-to-cash teams. The collection teams extend the collaboration to their customers by enabling them with a single interface for all receivable related issues, including invoicing and payments to enable seamless customer correspondence. These teams are also able to automate the capture of promises-to-pay from low-risk customers, thereby freeing up bandwidth to focus on the most critical and important accounts. The collection teams stay significantly ahead as they start advancing the axis of the collections process far earlier by leveraging advanced machine learning algorithms to predict the possible date on which a customer could make a payment and therefore chase customers proactively. This considerably optimizes the collection activity and ensures a square focus on accounts that are most likely to be delinquent. These teams are able to achieve the maximum collection output while deploying the least resources and ensuring high levels of customer satisfaction at the same time. The cash is posted automatically once payment is done with no touch. The process overview is given below: The following explores how the proactive process defines the 5 key success factors:
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.