The Ultimate Checklist for Choosing the Right Debt Collection Software

Introduction

Did you know that poor cash flow management is one of the most common reasons for most business failures? In fact, 82% of businesses that fail claim this as the main reason.

Effective debt collection is crucial in keeping your business’s cash flow steady. So, one of the most critical responsibilities of AR leaders is choosing the right debt collection software for their company. 

Picking the right collection software these days is not easy. Why? Because the market is flooded with options – making it challenging to choose the right one. 

Let’s look at how you can make the ideal selection among the available debt collector software options. But before that, let’s start with the basics.

What is Debt Collection Software

Collection software is a tool that streamlines and automates the process of recovering outstanding debts, eliminating the need for manual intervention. It helps reduce manual errors, automates mundane tasks, and integrates smart worklists and prioritization. It ensures faster and better collections. 

Fast and efficient collections can directly impact your business outcomes. Say you are unable to recover the money owed to you by customers in time or at all. In this case, your company can suffer dire consequences like cash flow constraints, working capital issues, unstable customer relationships, difficulty in financial reporting, and much more. Therefore, it is essential that you adopt methods and technology that streamline your collection process and provide rapid results. 

Why Do You Need Debt Collection Software?

Debt collection software empowers businesses to streamline and automate their debt collection processes and effectively manage their outstanding debts while maintaining compliance with regulatory requirements. The benefits of collection software are pretty numerous, including:

• Centralized management – Payment collection software creates a centralized system for all your collections activities. So, no matter how many people work in your collections department, all your data is stored in one place, and all collection activities can occur through a single dashboard.
• Improved cash flow – Adopting the right debt collector software can significantly help you accelerate the rate of your collections through automation and AI. This reduction in the time taken to collect payments can result in better cash flow for your business.&nbsp
• Reduction in DSO – With debt collection software, you can streamline your collections operations and prioritize and identify overdue accounts more efficiently. Automation features also reduce the time taken for the entire process like credit monitoring. This reduces your overall days sales outstanding.
• Enhanced transparency – With the help of collections management software, you can maintain complete visibility of the process, outstanding invoices, payment details, and collector performance. 
• Data analytics and reporting – When you have a centralized software for collections, you can get insights into performance statistics, through advanced reporting and analytics features. You can analyze AR aging reports, collections rates, and customer payment trends to plan your future strategies and improvements. 

6 Ways a Debt Collection Software Can Solve Your Collection Challenges

Before technological advancement, B2B collections posed many challenges. These challenges slowed down the debt collection process and put businesses at risk. Some of the challenges faced are as follows-

1. Time-consuming

   
   

   Problem – Collecting payments on time involves many repetitive tasks that can take up a lot of unnecessary time like gathering and entering data, finding invoices, prioritizing customers, etc.

   
   

   Solution – Collections software can automate these mundane tasks so that precious time can be saved and redirected to more impactful tasks that require human attention. 

   
   

2. Increased Human error

   
   

   Problem – The natural tendency for human error exists in all tasks, however, it can have a domino effect and lead to disputes and inaccurate financial reports. 

   
   

   Solution – When tasks that require precision and error-free execution are automated, it leaves very little room for mistakes whether it is data entry or AR aging. 

   
   

3. Resource-intensive

   
   

   Problem – A large amount of human resources are required to carry out manual collection activities. This also increases the company’s expenditure on payroll etc. 

   
   

   Solution – By automating major repetitive tasks and resource-intensive tasks like data entry, worklist prioritization, and gathering information from various sources you can cut down on the resources allocated for such tasks.

   
   

4. Limited scalability

   
   

   Problem – As your business grows it can become difficult to carry out collections on a large scale. The greater the number of customers and the amount owed, the more resources you will require. This is not always possible due to budget constraints.

   
   

   Solution – Collection software can eliminate the requirement for more resources and allow you to scale your business to any extent without extra costs or effort.

   
   

5. Lack of standardization

   
   

   Problem – When multiple people handle different aspects of debt collection, it can lead to disparity in the process and difficulties in compiling and analyzing data at a later date. 

   
   

   Solution – Software and automation can ensure standardization in various processes like data collection etc., which helps avoid discrepancies. 

   
   

6. Difficulty in customization

   
   

   Problem – In order to build healthy customer relationships and drive collections it is important to customize payment plans and collection strategies. However, with manual processes keeping track of these customizations can prove complicated and lead to errors.

   
   

   Solution – A good collection software will cater to customization on a customer-to-customer basis. For example, once a payment installment plan is set up and put in the system it will reflect to all people involved in the process, leading to fewer errors and more transparency. 

   
   

Features to Pay Attention to When Selecting a Debt Collection Software

When looking for good collection software, there are some key features that you should keep an eye out for that can help your business.

1. Customer prioritization and segmentation – Look for software that prioritizes customers using AI algorithms and advanced analytics based on payment history, risk level, outstanding balances, and predicted payment dates.
2. Automation – The software you choose should automate repetitive tasks that don’t necessarily require human intervention.
3. Integration with existing systems – A good software is one that is versatile and easily integrates with various ERP systems and accounting software to ensure data synchronization.
4. Customizable workflows and templates – It is important that your collections software allows you to customize your workflows as also provides templates that you can tailor to your business for communication with customers.
5. Compliance – Ensure that the software you select complies with regulations like GDPR, HIPPA, or PCI DSS.
6. Reporting and analysis – Reporting and analytics can be quite important to assess the financial position of the company and improve collections strategies; ensure the software you choose gives you data like aging reports, collections performance, and payment trends.
7. Dispute management – Pick an AI-powered collection software that offers features that can help with dispute resolution. It is crucial as disputes play a significant role in delayed payments.

Questions to Ask When Choosing a Debt Collection Software

Before buying a collection software, you need to evaluate its features and benefits. It also helps to conduct a debt collection software comparison. Here, we have a checklist crafted by our experts in the field for you, which covers all the questions you need to ask to determine which collection software is best for your business needs.

How Ferrero Saved 1000+ Hours With Collection Management Software

Ferrero is the world’s second-largest chocolate confectionary, with a revenue of $12 billion. While their business thrived for years, they faced many issues with their payment collections. Here are some of its main challenges – 

1. Difficulty in keeping track of their past due customer accounts.
2. Their manual processes and dunning made the collection process very tedious, resulting in longer collection cycles. 
3. Because of their high employee strength of 34000 employees from different teams, there was no visibility across customer profiles due to data silos.

We used our collection management software to solve their problems and drive significant results. Here are some of the key features of our product that solved their main challenges –

AI Prioritized Worklist

Our AI-powered software helped them do worklist prioritization, which used specialized algorithms to analyze customer accounts based on 20+ variables ( amount, aging, risk factors, etc.) along with 12 months of payment history. This resulted in creating a prioritized list of which customers to contact, suggestions of what actions to take, and assigning collectors to various customers based on their time and bandwidth. 

This helped them keep track of their past-due accounts, get a prioritized list, and save hours.

Advanced Dunning

Our software provided advanced dunning features that allowed them to automate their entire dunning process by scheduling and sending account statements, past due invoices, proactive payment reminders and broken promises-to-pay. It also gave them access to customizable email or communication templates to reduce the time taken to compose these emails.

This resulted in a drastic reduction of time taken for dunning, organized their dunning process, and reduced their collection cycles.

Intelligent Email Inbox

Our intelligent email inbox helps them centralize all incoming and outgoing emails and communications from customers so that collections analysts do not have to keep shifting from ERPs, email software, and the collections cloud. It consolidated all collections-related data in one place to ensure ease of data tracking.

This helped Ferrero gain visibility across departments and maintain data standardization.

Therefore, using a good debt collector software resulted in Ferrero saving 1000+ hours per year in collections activities, decreased their DSO by 28% and a 67% reduction in ADD. 

Debt Collection Software Review

As we talked about above, it is important to look for product reviews while going through your collections software evaluation checklist. Here is what our clients have to say after working with us. 

How HighRadius Can Help

If you are looking for the best debt collection system to solve your debt collection problems then a good collections management software can help greatly. HighRadius Collections Management Software might be perfect for you. 

It is a comprehensive component of the Order-to-Cash Suite that helps you streamline and optimize the collections process for your business. Our software includes high-end features that revolutionize your collections process with the power of AI and automation. It includes features built to meet all your business needs.

FAQs

1) Which software can be used for debt collection?

These days, many software are available in the market that can help you optimize your collection process. They can streamline your collections process and make it more efficient. All these software are AI-powered, which can reduce manual work and errors and help you save time and money.

2) What is the best debt collection software?

HighRadius Collection Management Software is at the forefront of debt collection software as it caters to businesses’ needs. It includes features like AI-based worklist prioritization, automated call logging, and automated email messaging. You can also tailor the software to your business needs.

3) How much does debt collection software cost?

This depends on the software and the features that it provides. The process differs from company to company. Most software tools are priced on the basis of a ‘per month per user’ plan. Prices also tend to vary depending on the customization you need from the tool as some companies tailor them for you.