Executives often focus on getting more customers or reducing costs as ways to boost profitability, but improving collections may be a better option. The following five strategies can help you to enhance your existing collections process or design a new approach.
Responding quickly is important throughout the entire collections process, but it is crucial in the beginning. A single missing payment can often be resolved with a simple phone call if it is detected and the call is made as soon as possible. It becomes more difficult for consumers to pay as missing payments pile up, and multiple approvals become necessary for B2B collections. Fortunately, there are signs of progress. Average B2B payment time in the EU fell from 37 days to 34 days between 2017 and 2018. Regardless of the age of the receivables, there should be a specific person or department responsible for collections that responds immediately when customers want to make payments.
Systematic Follow-Up Based on Aging of Receivables
A systematic method for tracking debts as they age is also essential. Experienced professionals can sometimes track everything using only standard spreadsheets, but most collectors need specialized software with time-based triggers for follow-ups. This is especially true for large collections departments where new collectors are hired on a regular basis. New collectors need to be able to start where someone else stopped to keep your collections on track.
Verifying and Preserving Information
All too often, the collections process fails because of inaccurate information at the beginning and missing information at the end. It is vital to be sure that addresses, phone numbers, and other contact details are up to date. Many customers will not pay if they never receive the bill. The early stage is also the best time for collecting records. Dated documents like notices, invoices, and medical records are often crucial to making a credible case later in the collections process.
Outsourcing to Collection Agencies or Attorneys
Many businesses think that they are too small to outsource collections and do not save the necessary documents, but that is a mistake. 45% of the members of ACA, the international association of credit and collection professionals, reported that small businesses accounted for more than half of their work. The key to settling old B2B debts is meeting the internal guidelines of the other company, and the key to settling consumer debts is having a credible case that could be prosecuted. Simply preserving the right documents gives you the option to outsource later.
Between quick follow-ups, making phone calls at the beginning, and saving documents for the later stages, even most professional collectors are going to be overwhelmed without specialized software support. Professionals need the right tools to be effective, and less experienced collectors do not know where to start without an automated system. Time-based triggers, click to call, and automatic document preservation are just some of the features available today. Businesses are increasingly turning to automated solutions, and Allied Market Research estimates that the European debt collection software market will grow at an annual rate of 9.6% between 2018 and 2025.
Partnership Cannot Be Automated
Automation lies at the core of an efficient collections process, but automated software solutions must be updated to deal with changes. Collectors frequently rely on proprietary databases. Unfortunately, databases sometimes change dramatically with little regard for the impact on businesses. That is one reason why Relational is committed to long-term partnerships that keep collections software stable, compatible, and up to date.