Recovering money that customers owe your company is tough, but it’s an unavoidable part of running a business. If you don’t handle debt collection well, it can adversely impact your cash flow. That’s where debt collection software and tools offer a lot of respite.
A good debt collection software not only allows you to track and follow up with defaulters efficiently but also helps predict debt recovery and enables faster collections.
Not sure what debt collection software is or how it can help you minimize debts? Well, we’ve got you covered.
Debt collection software is a tool designed to fast-track and streamline the collection process and reduce non-payments from customers. It helps businesses efficiently track, and manage overdue payments, ensures greater connection and coverage, and unlocks higher Promise-to-Pay easily.
Good collections software comes with advanced features like sending payment reminders, summarizing customer calls, first-level queries with omnichannel chatbots, advanced dunning, and more. Such types of debt collection products are increasingly used by creditors, collection agencies, and businesses to monitor customer payments.
How does the cost of collections change as the invoice ages?
The debt recovery process is often daunting and costly, especially for businesses with higher day sales outstanding (DSO). Implementing debt management system software helps reduce bad debts and offers numerous benefits.
Managing the debt collection process involves remembering collection days, sending payment reminders manually, spending countless hours calling customers, and handling paperwork, making it an extremely labor-intensive and time-consuming task.
A debt collection solution helps businesses streamline their collection workflows, automate routine tasks, and free up valuable time for collections teams to focus on more strategic activities. This leads to improved efficiency, increased productivity, and, ultimately, faster debt recovery.
Manually processing collections often leads to wrong customer information, calculation errors, and incorrect data on ERPs, which can severely impact collections. Automating the process with a debt collection software platform will improve accuracy and remove inconsistencies when analyzing customer data for collection.
Manual debt collection processes often lack the flexibility to cater to individual customer needs effectively. Debt collections platform provides businesses with the ability to segment customers based on various parameters, such as payment history, outstanding balances, or creditworthiness.
Effective communication plays a vital role in debt collection. However, manual processes can result in delays, miscommunications, and inconsistent messaging. Debt collection management systems offer various communication channels, such as automated email reminders, SMS notifications, and interactive voice response (IVR) systems.
Manual processes cannot often analyze and leverage data effectively. Debt collection automation systems collect and analyze vast amounts of data, providing valuable insights into customer behavior, payment patterns, and overall collection performance.
Here’s a comprehensive rundown of the five major problems with debt recovery management software that can impact your collections and how to turn them in your favor. In addition, for each debt collection challenge, we’ve also listed some tools or features that can help you overcome those problems.
Most debt collection software supports only basic dunning processes based on aging analysis using collection buckets of 30, 60, 90, and 120 days. To implement advanced capabilities like trigger-based dunning or integrating payment gateways, businesses will have to rely heavily on IT professionals or customization by third parties to configure these automated features.
But there are some collections softwares that offers advanced dunning features to automate emails with smart payment links for long-tail customers and increase outreach by ten times. Collections analysts can choose customized email templates from 100+ pre-built ones to send payment reminders, automate past due notices and account statements, and display real-time customer balance by enabling smart payment links in emails. Analysts can leverage over 50+ rules to cover event-based triggers.
The feature also allows the team to send bulk correspondence to communicate changes and generate auto-draft correspondence letters with attachments. Analysts can also review them before sending them out to customers. For example, if a $1000 Invoice is past due, the system can send an Automated email correspondence to the customer, with an attached invoice copy and proof of delivery (POD) document.
Leverage our ready-to-use email scripts used for collection dunning with our
Collection Email Automation Template
Despite the global shift towards automation, most debt management software provides only basic worklists with rudimentary parameters like aging and past due amounts, which are insufficient to reduce DSO. Additionally, they lack AR-specific AI capabilities to address collection use cases and fail to account for changes in customer behavior or collection analysts’ workload.
Choose a collection tool like HighRadius Collection Management Software, which offers advanced AI-based worklist prioritization and lets you consider 12 months of payment history and various factors such as clean past due, promise to pay violations, customer credit risk, and more. This helps identify which customers should be contacted, suggest actions, and assign customers to collectors based on their availability. It also dynamically segments customers and adapts to changing behaviors and conditions.
For example, if a collector working 8 hours a day wants to spend 60% of their time making calls, 30% sending personalized messages and 10% reviewing system emails, a good collection tool will create an optimized worklist of 100 tasks for the day.
Improve the collections process and move up the maturity pyramid with our
Excel-based maturity model template
One of the major gaps with traditional collections software is that analysts still have to make manual phone calls from traditional systems like Cisco, Phone Avaya, etc. Businesses have to manually log calls, make call transcriptions, and summarize customer interactions, which kills the productive time that could have been utilized for things that matter.
One of the best and exclusive features of HighRadius’ collections software is the in-app dialer with pre-built integrations, enabling collectors to initiate phone calls while using the system. It uses natural language processing (NLP) to capture and track calls and transcribe customer interactions. Collectors can also send follow-ups after a collections call after a quick 30-second review. One of the best functionalities of this feature is that it allows collectors to receive calls from customers in the system, which automatically pulls up the full context of callers.
Most debt management software does not provide AP portal automation or any pre-built integration for e-invoicing. Businesses have to implement third-party RPA bots like UIPath, BluePrism, OpenText, etc., to build interfaces, which can be easily disrupted even with minor changes on the front end. Worse still, it takes approximately $15k per bot to customize and $3.5k per year to maintain. A company requires a minimum of 15 such bots, leading to a build cost of $150k and a $50k maintenance cost every year.
HighRadius offers pre-built integration with multiple AP portals that deliver invoices by logging into customer portals and tracking their status. The collections software captures data from these websites and updates the Collections cloud solution so that the collector does not have to go to different third-party websites anymore.
For example, customers can post the invoice status on a portal, and collection analysts have to manually log in to the portals to see if their invoices are going to be paid, disputed, or require additional clarification. This process is automated using Web Portal Collections.
While conventional automated debt collection software can send some basic dunning emails, the responses go to the collections mailbox. Collectors will have to switch between the software and the mailbox while performing different tasks. Moreover, analysts have to perform tasks like creating promise-to-pays and resolving disputes manually, which leaves a risk of missing critical emails.
HighRadius’ collections software offers a centralized, intelligent email inbox for all outgoing and incoming mail, saving analysts from constantly switching between ERPs, collections cloud, and email software. It automatically links incoming emails to customers and views the back-and-forth conversation between a Collector and a Customer in a Conversation Thread view.
Despite the collection analysts spending more than half of their time and energy in dunning and sending emails, the collections are usually slow with unscalable workflows. Moreover, the information gaps and lack of integrations leads to longer collection cycles and growing receivables of businesses along with increased DSOs.
A fully automated debt collection software helps businesses create proactive collection strategies, fast-track collections, manage extended payment terms, and prevent bad debts. Such a solution acts as a one-stop platform to streamline the AR process, manage extended payments terms, and also:
Here’s how fully automated debt collection software can help you maximize profit and reduce debts:
Collection analysts, most of the time, are reactive as they take action only after an invoice has hit the past due status. Our collections software uses historical data and customer payment behavior trends to derive a payment prediction date right from the day the invoice is generated. The system will then leverage this data to identify the customers that are most likely to go delinquent and prioritize an analyst’s time accordingly. This will allow collection analysts to transition from reactive to proactive collections, identifying at-risk customers much sooner.
HighRadius provides an integrated dialer that enables collection analysts to make calls with the ability to have a summary view of the interactions between them and customers and capture notes. It uses NLP to convert those conversations into text and promise-to-pays and call notes automatically. Every single call made by collectors is automatically logged allowing for easy performance tracking, unlike other debt management software that requires a custom integration to be built with phone systems.
Our collection software is robust enough to enter customer portals and automatically capture the status of an invoice and overdue payments. Built-in bots in our collection cloud will identify the changes made to customer portals to track invoices accurately and do not require heavy maintenance.
HighRadius debt collection solution has an IP for autonomous technology that helps businesses give voice commands to make phone calls; track promises to pay, capture notes, etc. This generative AI via FreedaGPT helps businesses to process queries, automate responses and attachments, and prepare reports and charts using NLP prompts in a chat window.
Usually, a collector analyst spends 30% of their time crafting debt collection emails. In addition, switching between ERPs, customer websites, and email software like Outlook kills more time. On average, they can reach out to 240 customers per week. And they end up losing 35% of their time following up with customers over phone calls.
However, to streamline this process by building custom, built-in features in debt collection management software, it would require at least 30-60 email templates, countless integrations with customer websites, a custom AI model to predict customer payment behavior, and integration with telephony systems. These customizations can lead to an expenditure as high as $1.5 Mn in build cost and $300,000 per year in internal IT cost from a maintenance standpoint.
HighRadius enables the team to reach 5X the number of customers because of its superior automation, thereby reducing past due by 10-20%. When the number of customers leveraging websites rises, successful delivery of invoices will increase, and so will the chances of getting those paid on time, thus improving DSO.
Also, by reaching the right accounts and fostering better prioritization, collectors can reach the right set of accounts that have a high likelihood of default. This helps prevent missed payments and improves DSO by 10-20%.
The collection process relies heavily on two things: identifying the right accounts for follow-up and managing customer communications effectively and efficiently. HighRadius collections management software helps achieve this by automating these processes. By freeing up the collection team’s valuable time and allowing them to focus on more strategic activities, businesses can reduce operating costs, accelerate cash flow, and improve their bottom line.
Additionally, with HighRadius debt collections management software, companies can gain access to intelligent analytics and reporting tools that provide deep insights into their collections performance, which in turn help them drive informed decision-making, optimize their collections strategies, and drive better results. It also offers seamless integration with your existing systems, ensuring a smooth implementation and maximizing the value of your technology investments.
The result? Collections analysts can save 10-20% of their collections time and boost their productivity.
There are numerous debt collection strategies to reduce bad debts. Some of them are:
Most automated debt collection software is priced on a “per user, per month” model. The entry-level plans range from $2.85 to $219. The price can go up if businesses want to include integrations for telephony systems, chatbot features, customer website portal logging, and so on.
Here are a few ways to improve accounts receivable collection:
Here are some ways to automate debt collection:
A debt collection software will:
Businesses can use AI in debt collection to:
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Colleen Zdrojewski
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HighRadius Corporation
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