Account receivables can be a source of significant financial difficulty when not managed properly. Inefficiencies in a company’s accounts receivable practices can have a negative impact on the bottom line in the form of increased collections costs and delays in receiving monies owed.

Many companies struggle with getting their customers to pay on time and even if most customer accounts are up to date those that are not can drag down profitability. This is why it’s so important to invest in processes to systematically improve collections and reduce outstanding receivables.

In order to better manage a company’s collection procedures, it is important to implement a strategy that ensures that all aspects of the process – prioritization, customer contact activities, written communications, collection calls, escalation and resolution – are in sync.

Typically, organizations rely on systems to generate the data to initiate and manage these activities. Organizations with some level of sophistication have systems in place that identify, prioritize and even initiate communications with customers who fall in the various collection buckets. However many others use a mix of technology and human brain-power to identify and analyze the data in order to turn it into actionable information that is then used to drive collection activities.

In the case of organizations with smaller customer pools, they are often in a position to take the time to manually dissect their customer’s information and flag those that require any special action. However, for companies with tens of thousands or even hundreds of thousands of customers this is not a viable option due to the time and costs involved. For these organizations, most communications that pertain to collections are generic in nature. Customers are dropped into buckets, defined by how late they are in paying their bills, without regard to customer specifics. All customers are treated equally. As soon as a payment date is missed, bucket processes are activated and bucket specific communication goes out. These could be via snail mail, emails or calls from the credit operations team, with some extreme cases being referred to collection agents.

The problem with this approach is that a customer with an otherwise clean payment record may receive a not so friendly communication if they miss their payment. That means that good customers receive the same treatment as those customers who are routinely late in paying their bill. Everyone has probably had the experience at some point of receiving a communication like this when because of oversight, temporary cashflow issues (perhaps someone is late in paying YOU) or some other reason you miss paying a bill that you otherwise typically pay on time. This sort of interaction can have a negative impact on customer satisfaction when a rare missed payment is used to make you feel like a bad person.

Many organizations know which customer are usually delinquent and they know what communication messaging works best. If they have been in business long enough, they have processes in place that consistently yield positive outcomes. However, this requires the use of highly sophisticated modeling and technologies not always available to all accounts receivable teams. However it’s important to understand that the implementation of predictive modeling can significantly reduce the time between invoicing and receipt of payment. The effectiveness of accounts receivable collections will be significantly improved by better managing the account receivable lifecycle, automation of collection steps and personalization of the communication.

For instance, taking preemptive communication actions on inhttps://www.datatel-systems.com/ivr/automated-payment-remindersvoices that are likely to become delinquent (customers who have been late in paying the last 3 billing cycles for example), such as initiating an automated voice call or text message saying this is a friendly reminder that your account will become due in 5 days can help drive down collection time. The objective is to be pre-emptive rather than waiting for the account do become over-due.

A similar approach can be taken for a customer who is always on-time however for some reason is late in paying the last invoice. An automated voice call or text message saying We know you are always on time paying your bill, this is a friendly reminder that you missed your last payment which was due on_______ can be more effective (and welcome too, especially if it’s simply a matter of them forgetting that particular month) than something that is more accusatory in tone.

By implementing algorithmic collections communication, businesses and organizations can help improve collections and reduce outstanding receivables, while maintaining positive customer relations. The end result is an optimized business financial performance.

To learn more about Automated Payment Reminders click here