What is Customer Segmentation in Collections?

Segmenting customers for Collections into buckets of strategic accounts and providing an insight into Collections process for faster operations


Chapter 01

Executive Summary

Chapter 02

What is Customer Segmentation in Collections?

Chapter 03

Benefits of Customer Segmentation in Collections

Chapter 04

Segmentation Dimensions

Chapter 05

Collection Segmentation Clusters and Strategies

Chapter 06

Tools to Deploy: Key Criteria

Chapter 07

The Scalable Solution

Chapter 08

About HighRadius
Chapter 02

What is Customer Segmentation in Collections?

Customer segmentation refers to the strategy of dividing customers into groups based on static and dynamic factors including credit score, type of account and payment method, to improve customer correspondence and compliance to credit policy. It is important for collections departments to segment customers to personalize customer correspondence and help collectors in upgrading their collection efforts. Invoice level segmentation is also one of the trending methods adopted by leading companies to prioritize invoices based on invoice value and due-date. Traditionally, the collectors called the customers for outstanding invoices and overdue payment commitments. This was feasible because of 1) Limited number of assigned accounts and 2) Personal acquittance of collectors with the buyer A/P teams. However, today it is not uncommon for collections analysts to get assigned to hundreds or thousands of accounts. It has become important to bucket customers into segments with similar attributes so that the collections analysts can not only scale collections process with an increasing number of customers but also keep the communications personalized. As per McKinsey?s report, more than 70% of collection calls are wasted! These calls are made for accounts where the customer would have paid even in the absence of these calls. This fact clearly underlines the undeniable threat to the scalability and seamless working of the collections process due to ineffective customer correspondence strategies. Customer segmentation helps in optimizing resources to recover more receivables at less cost. Customer segmentation is based on the fact that every customer stands differently in terms of financial stature, market trends and business relation with the company and the collection efforts. However, many organizations could be categorized into buckets by taking into account a certain set of attributes to finetune the collections process. The next section explores the key benefits and takeaways of customer segmentation in the collections process.


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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.