This e-book uncovers the leaks in account prioritization, which can inflate past-due A/R by 150% and the means to seal the leaks through industry best practices and smart segmenting factors to increase team productivity and ensure faster collections
Collections is one the most important processes in Accounts Receivables. For a business to have a leading growth graph, a business ‘needs’ to put efforts into Collections Management. It doesn’t matter how well a company’s marketing efforts are going or how many sales they make if they are unable to collect any of their open invoices. With the changing economic times, the collections process has evolved over the decades from 1st generation to the 3rd generation. The evolution focuses on how collections has grown from a fully manual and limited ‘dial for dollars’ approach to a reactive process with semi-automation.
1st generation collections teams leveraged custom programs written over mainframe or ERP databases to prepare aging reports on a daily or weekly basis. The team would then ‘dial for dollars’ via phone calls.
2nd generation in the early 2000s saw the emergence of Data Warehousing and Business Intelligence tools which added additional insights to regular aging reports. However, the analysis was still manual and the teams would still ‘dial for dollars’ but had a better context to filter ‘who’ and ‘what’ in calls.
3rd generation from 2010 onwards saw dedicated software products for Collections Management which became the defacto standard for collections and brought fundamental automation into the picture. Email adoption added value by shifting a good proportion of phone calls to emails. This enabled 30-40% collections automation and an average 10% DSO improvement.
The focus over the years in the collections process has been on improving the accessibility of data and enabling some amount of automation. With the onset of collections evolution, the other accounts receivables process in the credit-to-cash cycle have also matured over time. The readers would agree that the days when A/R processes were siloed are far behind us. The next section takes a closer look.
In the developing A/R scenario, it is no longer possible for collections process to remain isolated. The inter-department connect is of paramount importance when it comes to collections as the process needs data from other departments for not only slicing and segmenting the information for better worklists but also for efficient correspondence with the customers.
The collections team interacts with the credit management team to get information regarding credit risk class and credit limit utilization to formulate a fruitful correspondence strategy. The credit team in return also needs the support from collections teams to correspond with the customers for releasing blocked orders. The cash application team provides inputs for the invoices against which the payments have been made so that they can be removed from the worklist. Moreover, the collectors often identify pre-deductions, forward them to the deductions team and update the worklist accordingly. They also get inputs from the deductions team on the invoices with invalid deductions and need to kick start correspondence with them so they can decrease the overall past-due A/R.
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