How to Revamp Your Collections Strategy for the Mid-Market

Introduction

Are you struggling with inefficient collection processes? With a projected 46% increase in invoices over the next three years, CFOs face the challenge of effectively managing accounts receivable collection, especially for mid-market businesses. Manual processes, inefficient prioritization, and outdated tools often lead to delays and lost revenue.

The urgency to optimize collections has never been greater. This blog explores how CFOs can transform their collections strategy by automating manual tasks, streamlining workflows with advanced features like integrated dialers, and leveraging AI-led prioritization.

What Challenges Do CFOs Face in Midmarket Collection Strategies?

CFOs need to recognize that a midmarket collections strategy involves more than just chasing overdue payments and following up with customers. Relying on legacy systems can lead to roadblocks such as complex and slow dunning processes, decentralized email systems, fragile integrations, and a lack of basic automation for invoice uploading and email responses. These issues are causing significant setbacks for CFOs in managing collections effectively.

• Reactive collections instead of proactive collections

  Collection analysts often take a reactive approach to collections, which means they address overdue payments only after they have become problematic instead of proactively managing and preventing them. This approach involves contacting customers only when invoices are past due and not sending any alerts or reminders, identifying past-due accounts on an ad hoc basis, and minimally tracking payment patterns or early warning signs.

• No out-of-the-box integrations

  Many large enterprises require their suppliers and vendors to upload invoices directly to their accounts payable (AP) portal rather than sending them via email or post. Unfortunately, with legacy collections systems, the collections team must manually log in to the customer portal each time to upload or check the status of invoices.

  These systems lack out-of-the-box integrations for automatic portal logins. As a result, CFOs either need to develop custom in-house integrations or rely on third-party robotic process automation (RPA) providers like Blue Prism or UI Path. These solutions require substantial maintenance and are often fragile, frequently breaking when changes are made to the customer’s website.

• Manual call logging and notes taking

  Conventional collection systems lack an integrated in-app dialer, forcing collectors to manually make customer calls using traditional telephony systems like desk phones, cell phones, or applications like Cisco and Avaya.

  Additionally, these systems often do not have built-in note-taking features. As a result, the collection team must manually transcribe customer interactions, create promise-to-pays, and log call details. This manual process reduces efficiency, especially when handling inbound collection calls.

  CFOs need an automated dialer app that eliminates the need to switch between the collections system and telephony tools. Such a solution would provide readily available insights and summaries of customer calls, allowing the team to focus on more critical tasks.

• Decentralized emails 

  Most collections solutions don’t have any pre-built integrations with email platforms. Analysts have to continuously switch between their collections platform and email inboxes to check customer responses and rely on Outlook/Gmail to correspond with the customer.This makes the task as simple as sending emails complicated and leaves a risk of missing out on mission-critical emails, leading to delayed payments and escalated collection issues.

• Lack of customer behavioral insights

  Collection analysts need in-depth insights into customers’ payment behavior and changes in customer activities on the portal to accurately predict payment dates, adjust collection strategies, and reduce day sales outstanding (DSO). However, due to a lack of integrations, CFOs need to build an in-house data science team to build AI features for data capture. This calls for a significant investment of time and effort without a proven history of success.

• Generic AI features that do not solve specific problems 

  To deal with evolving business complexities and fast-track payments, CFOs need collection strategies that enable their teams to parse emails to capture critical information like promise-to-pays (P2Ps), predict when customers will pay an invoice, and identify the intent of customer emails to frame accurate and nuanced responses.

  Unfortunately, legacy systems only provide basic or generic AI features that do not solve any specific collection use cases. Analysts have to manually identify the email intent or check the invoice status to predict the payment date. Any inaccuracy in payment date prediction can make invoices go delinquent, thereby impacting collections aging and increasing DSO. 

Why Is Customer Segmentation Critical in Collection?

Customer segmentation in collections refers to the practice of categorizing customers into different groups based on their purchase intent, payment history, geographic location, industry type, and credit risk to optimize collection strategy for midmarket effectively. 

One of the main benefits of customer segmentation in collections is that it allows collection analysts to create customer hierarchies based on customer bases like multi-level buying groups and reflect on the structure of these groups. For instance, the collections team can create customer segmentation based on:

• Virtual Customers

  The team can set up & maintain a virtual customer in the collections cloud, rolling up multiple customer entities that together form a collections group. The team will then change the virtual customer mappings as the end customers change their payment behavior. 

• Rollups 

  The team can consider collections activity (Notes, P2Ps, Emails, Contacts, etc.) and aggregates (Past Dues, Aging Bucket totals, payments, P2Ps) and make them visible at all levels of the hierarchy. This information can be further used for escalations when a collector is talking to the customer if they are unable to collect from the child customers. 

  However, making and maintaining these changes in the ERP takes time and effort. Collections happen at different levels of the hierarchy, which may not represent the actual setup of the ERPs.

  HighRadius offers dynamic customer segmentation to help CFOs ensure that the cloud solution adapts to changing customer behavior and conditions. For example, based on certain criteria such as the broken promise to pay, credit utilization, external credit data, etc., the cloud solution can move the customer from a low-risk to a high-risk category.

How to Optimize Collections Strategy? 

The major hindrance CFOs face with the collections strategy is performing mundane, manual, yet critical tasks like sending payment reminders, uploading invoices on customers’ accounts payable (AP) portals, etc. 

Did you know that collections analysts spend more than 30% of their time sending emails? 

Moreover, they have to keep switching between the collections website and email portals to track customer interactions and spend as much as 35% of their time making phone calls and summarizing conversations. 

Here are a few things CFOs can do to optimize collections strategies. 

• Make dunning effective and efficient 

  Dunning is one of the crucial tasks in the collections strategy. Collectors need to send dunning as formal reminders to customers for outstanding payments to ensure they receive timely payments and reduce any negative impact on cash flows. The best way to speed up the most common time-consuming activities is to have 30-60 customizable email templates at hand, integrate a payment gateway in the email itself, and allow the customer to pay immediately through any preferred payment method. 

  HighRadius’ collection cloud offers advanced dunning and a collection letters library. This library allows collectors to create and manage email templates with attachments for both automated and manual correspondence, thereby reducing the time it takes to compose emails. The CFOs’ collections team can also send emails for account statements, past-due notices, proactive reminders, and broken promise-to-pays.

  For instance, a customer might have thousands of customers with past-due invoices. A collector can’t cover all these customers manually. Collections Cloud sends out account statements and past due notices to them so that the collectors can reach out to 10x the customers, selecting and customizing the relevant collection letter template rather than manually sending every collection email.

  Improve productivity of the email correspondence process with our 

  Credit & Collection Email (Letter) Templates

• Ensure accurate customer prioritization

  Collector analysts need to go through hundreds and thousands of invoices in a day to find out the high-priority accounts that have the maximum chances of defaulting. Doing this mammoth task manually means collectors face the risk of missing out on customers who need urgent attention just because they spent the entire time skimming through low-priority collections. 

  A robust collections software like the HighRadius suite will allow CFOs to leverage features for AI-led worklist prioritization. It uses AI algorithms to look at 20+ variables like amount, aging, risk, anticipated payment date, and payment history to identify which accounts need immediate attention. It will also suggest actions to take and assign customers to collectors based on collection analysts’ bandwidth.

  For example, A midmarket firm has 30,000 customers and 20 collectors. A collector can typically contact about 40 customers via calls & emails, spending a minimum of 10 minutes per customer in an 8-hour day. The AI Prioritized worklist will help identify customers that will have the maximum impact on collections, vs. a collector figuring out who to contact and how to optimize their time.

• Centralizing email inbox

  The only way to remove the hassles of constant switching between email platforms and collections systems is to have a centralized, intelligent email inbox like HighRadius’ collections solution acts as a single source of truth for all incoming and outgoing collections emails, allowing analysts to work efficiently without leaving their ERPs. Additionally, our solution will: 

  • Automatically link incoming emails to customers and collectors and view all conversation threads. 
  • Perform all email actions directly from the application without switching to email software. 
  • Track email open and read rates, allowing the collectors to follow up on unactioned collection email software. 
  • Enables AI-based intent identification from customer email replies using NLP. 

  For example, a customer responds to a collection email stating that there has been a pricing dispute and asks for an original purchase order (PO) and invoice copies. The analyst in charge can then forward that email to the billing team to get copies of the original PO and invoice. Upon receiving the reply, the analyst can automatically generate a response using our Gen AI, FreedaGPT, to respond to the customer with the PO and invoice copies. All this information will be displayed in a thread view in the collections cloud, allowing the analyst to work on the request and create a dispute task based on the customer’s response.

  

• Making call transcription easy and seamless 

  One of the most tedious yet critical parts of the collection process is calling customers to remind them of late payments or solve collection disputes. Automating call logging and creating notes can help analysts save 40% of their time and help CFOs take devices or adjust strategies whenever collection efficiency dips.

  Features like HighRadius’ in-app dialer in collections solution make calling faster and simpler through:

  • Facilitating one-click calling 
  • Automating transcription and note-taking through natural language processing (NLP) 
  • Using AI-based intent identification from call notes and automatically creates tasks and actions. 

  For instance, if an analyst spends six hours daily on account research, note taking, call logging, and creating follow-up actions while spending only two-three hours on the actual calls talking to end customers, an in-app dialer will help them increase the call time to six hours by automating the note-taking, creating promise-to-pays, call logging, and creating follow-up action via voice-to-text and NLP capabilities.

• Streamlining activity logging and tracking 

  Analysts have to reach customers multiple times through emails, calls, follow-ups, and so on to collect past-due invoices. It is, therefore, vital for the office of CFOs to have a history of activity on an account (notes, call logs, payments, etc.) to review when deciding the next course of action. HighRadius’ collection cloud records and logs all activity in chronological order, helping teams quickly review past collections before talking to or sending emails to customers for collections. 

  For example, Todd calls a customer at Acme Corp., and Lisa from the AP team at Acme tells him to follow up after a week as she is awaiting internal approval needed for payment processing. In such a case, Todd can create a follow-up task to contact Lisa in a week, and the system will remind Todd of the due date. 

• Providing in-app payments for customers 

  One of the most significant elements of collections strategy is to improve the payment experience for customers. A best practice is to embed the payment link in the reminder email itself. Such self-serve payments will not only reduce the collection analysts’ work but also allow customers to make payments online.

  Our advanced features for in-app payment acceptance allow customers to pay directly by clicking a link in the dunning emails sent out automatically by the system. Customers can also pay selected invoices using a dynamic link created by a collector and sent to them. In addition, In-App Payments also provides the option to pay over the phone if the customer has a card saved on file.

  For example, Mike calls Tim from Duke LLC to follow up on an invoice Tim agreed to pay last week. Tim says he was about to make the payment but needed bank details from Mike. At this point, Mike can send Tim an email/SMS with a payment link in real time. Tim can then use the link to make the payment immediately. 

• Accurate and regular tracking of invoices

  Apart from uploading invoices on the AP portal, CFOS must track and observe the changes in a customer’s payment behavior to anticipate the payment date. However, manually logging in every time and gathering information is a daunting task. 

  Features like HighRadius’ AP portal leverage out-of-the-box Robotic Process Automation (RPA) to log into AP Portals, upload invoices, and track invoice payment statuses to automatically log P2Ps disputes, and capture relevant notes.

  For instance, Big Customers like Walmart and Target put the status of their invoice payments on a portal, and Collectors 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 the Web Portal Collections. 

• Optimize dispute management process 

  If a customer notices any anomalies or errors in invoices sent by a business, they can always raise a dispute and ask for validation. Collection analysts here must be able to establish an efficient dispute management process. They should be able to log disputes, identify reasons, and then assign them to relevant stakeholders to collect more information. 

  A good collections cloud must enable customers to raise disputes in the customer portal itself and collections analysts to log disputes, track status, send attachments, and match with dispute reason coding seamlessly. 

  With this in mind, collections solutions like HighRadius help customers create disputes at an invoice or SKU level and allow the analyst to manage the full dispute lifecycle from collections. Customers can raise disputes from dunning letters as well as analysts and add attachments and notes, route disputes to different departments, and resolve them in no time. 

For instance, John calls his customer, ABC Products, to follow up on a past-due invoice. However, the customer claims that the invoice shows incorrect pricing. John can then log the dispute with a reason code of pricing, route it to Amy from the sales department to request the PO, and then validate the pricing accuracy. Amy can then attach the PO copy to the dispute case and route it back to John within the Collections Cloud. John can then see that the dispute is valid and use an existing credit against the invoice to offset the pricing difference and resolve the dispute. 

What Midmarket CFOs Should Do to Optimize the Debt Collection Process?

Optimizing the debt collection process relies on two primary things. One is for the CFOs and the collection team to identify the right customer account to follow up on. The second is to manage customer communications most efficiently and effectively. To achieve this, midmarket businesses need a robust debt collection process that will not only provide scalable workflows but also improve DSO while reducing collections cycles and converting receivables. 

HighRadius’ agile and automated collection cloud brings all these benefits to optimize collections strategy for midmarket while offering state-of-the-art features for invoice tracking, AI capabilities, AP portal automation, and more. 

Here are a few ways a collections solution like HighRadius’ collection suite helps CFO optimize their debt collection process: 

• AI-led worklist prioritization for accurate invoice delinquency prediction 

  The AI-led worklists help CFOs eliminate the need for the collections team to manually prioritize and focus on the riskiest accounts. They also provide a 30-day future delinquency prediction, a proactive collections worklist to identify at-risk customers early on, and bandwidth-based work allocation that breaks down the time across each action, optimizing worklists for the day. 

• AP Portal automation to speed up collections

  An advanced collections system like HighRadius’ suite offers out-of-the-box RPA integration into over 20 AP portals to upload invoices and get the latest payment or dispute status. This will not only help CFOs ensure increased accuracy and speed of collections, but the system will also automatically upload invoices and get their payment invoices. 

• Automated proof of delivery (POD) for faster resolving disputes 

  One of the main aspects of swift collections is resolving disputes as quickly as possible. A good collections cloud comes with out-of-the-box RPA integration into over 50 carrier portals to automatically download and link a Proof Of Delivery software document to an invoice that will help resolve disputes quickly. Analysts can also get ready access to supporting documents so they don’t have to manually reach out to different departments to validate disputed invoices.

• Streamlining payment options for customers 

  Just embedding a payment link in the payment reminder emails to customers is not enough. Make sure your collections system enables customers to leverage any mode of online payment including ACH, Card, Paypal, and more through payment links in dunning emails and reminder SMS messages. 

  Moreover, those alerts must also have self-serve payment options to reduce the collector’s work, allowing customers to pay on the go. In addition, the system should also process over-the-phone payments with the saved card, ACH, or other payment methods during customer calls, and IVR systems must be installed to provide self-serve phone payment options.

• Fast-Track debt collections for overdue customer accounts

  Suppose a customer finds anomalies or discrepancies in an invoice. In that case, they can raise a dispute or ask a third-party collections agency to investigate the issues and validate the claim. In such cases, resolving the dispute and realizing the invoice might take forever, thereby increasing the collections aging and DSO. CFOS must streamline the collaboration process with the collections agency and ensure that revenues are materialized as soon as possible.

  A good collections system like HighRadius offers out-of-the-box integration with over 10+ collections agencies, leveraging expertise in collecting severely delinquent accounts. The suite lets analysts transfer all pertinent customer data to the agency with a simple click, eliminating the need to upload data manually. Additionally, they can track collection status directly in the app without the need to log in to the agency’s case management portal. 

What do you get with a system that acts as a one-stop solution for debt collection problems? 

• Save time on auto-correspondence and manual follow-up.
• Automate invoice handling and tracking using the AP portal feature.
• Ensure complete visibility across interactions and highlight data like call logs, notes, P2Ps, etc.
• Fast-track collections with touchless dunning through automated emails and in-app calls.

How Can Midmarket CFOs Use Automation to Streamline Collections?

Using automation for collections can help CFOs manage global nuances, get accurate customer payment behavior insights, and leverage differentiating capabilities for timely and speedy collections. Here are a few ways for midmarket CFOs to do this.

• Move towards proactive collections 

  The reactive approach gives minimal tracking of payment patterns or early warning signs; it means that actions are taken only when payments are already overdue. Leveraging advanced AI algorithms in a collections cloud will surgically identify the invoices with a high probability of delinquency and prioritize collections team efforts accordingly. This kind of feature is tightly coupled into the prioritization logic and thus results in a proactive collections tool. 

• Integrate dialer without any custom code

  Almost all major legacy collections solutions don’t come with an integrated dialer and would require CFOs to hire professionals who know how to build a custom code to integrate any dialer. Automated in-app dialer features like HighRadius collections cloud enable the collections team to make calls directly from the system and automatically create a log of every call made. This can be leveraged for tracking collector performance and is critical to managing a remote workforce and becomes even more important in times like these. Every call the collector makes is automatically logged, enabling easier performance tracking.

• Save time on tracking invoice status 

  As more customers implement AP portals to manage vendors, collectors are spending significant hours tracking invoice status updates on these platforms. HighRadius’ collection suite automates this process by offering pre-built integrations with over 1,000 portals. The solution automatically pulls the required data and logs it in the system, saving the collections team hundreds of hours.

• Dynamic workload balancing 

  Collection analysts often lose critical hours decoding lower-priority accounts, missing out on customers that need immediate attention. Automating workload balancing can help rack the goals vs. KPIs of collectors and perform dynamic workload allocation among collectors to help ensure that all accounts are touched.

Collection strategy midmarket examples

When one of the largest nitrogen fertilizer producers in the US wanted to fast-track their collections and fine-tune strategies, this is what they found. 

• Critical departments like receivables and credit operations worked in silos which led to added complexities in the collections and dispute management process. 
• Without a centralized information system or data repository, the company had a hard time establishing proper communication and getting ready access to frequently used data. 
• With the two critical departments working in a complete silo, teams had no visibility into the dispute management process and no clarity on whether disputes were coded accurately or not. 
• Each department communicated with customers in silos; there were no standardized processes for customer outreach or a centralized point of contact. 

How did HighRadius’ robust solution suite help boost their collection process?

Our robust and agile collections cloud and AR suite helped standardize the process, streamline dispute management, and accelerate collections. Resolution algorithms like credit-debit matching, shortage analysis, and price-variance analysis allowed the company to identify trade and non-trade deductions and resolve disputes using various algorithms.

In addition, with features like document linking and document backup, the company was able to aggregate access and attach supporting documents with disputes. They could also get access to a self-generated worklist that is prioritized based on fields like reason codes, credit details, and write-off approvals. 

The analysts were also able to track all dispute cases. All dispute cases were logged with a reason code and assigned to the relevant person based on the type of dispute. The team could now see the status of the dispute, as well as any notes and memos created against the dispute case. 

Streamline Collection Process with HighRadius Automated Collections Management Software

Usually, a collector analyst spends 30% of their time crafting collection emails. In addition, switching between ERPs, customer websites, and email software like Outlook consumes theirtime. 

However, if CFOs want to optimize the midmarket collection strategy, they must create custom, built-in features in 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’ collections cloud 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, 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 allowing for 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%.

FAQs