Companies across all industries are always focused on bringing more revenue through the door from new sales. However, making sure that debts are collected can be a more challenging and time-consuming endeavor. If a business accepts customer payments in forms other than only cash, it needs to set up debt collection practices to avoid cash flow issues.
Even if a business has an accounts receivable (AR) department that handles collections, it can maximize the debts it actually collects by centralizing and automating its collections process with software. Implementing a streamlined software system for monitoring customer payments and pursuing overdue accounts makes staying on top of overdue accounts much more manageable.
No matter the size or capacity of a company's AR department, its collections operations and success rate can be improved by incorporating a software program that reduces the employee input needed to manage overdue payments. Some of the major advantages of using software for your company's debt collection needs are explained below.
One of the major reasons why bad debt must be written off is that it has simply lingered too long as an overdue account without collection attempts at regular intervals. Businesses sometimes have a hard time keeping up with the payment due dates and the collection activity required. The first step is to establish the enforcement actions that the AR department will take once a debt is overdue.
The more challenging step is keeping up with the schedule of collection actions for each overdue account. Collection software can help AR departments stick with a definite schedule of collection tasks and reminders by automatically generating daily tasks for employees to complete. This means that debts will be collected quickly and before they linger long enough to become bad debts.
Integrated collection software systems prevent AR departments from missing out on opportunities to collect consumer debts as they age. Companies that have set collection systems are more likely to collect overdue invoices faster. When companies get paid quickly, they do not have to deal with as many cash flow issues and can keep up with customer demand.
Effective collection software solutions feature convenient payment options for customers that make entering into and collecting signatures for payment arrangements much easier. Customers can immediately sign payment agreements or confessed judgments when they are finalizing debt settlement arrangements with the AR department. This means that customers are more likely to stick with their payment agreements, and the company is more likely to receive signed agreements back that they can enforce in court if necessary.
One of the major advantages of debt collection automation is that AR employees can focus more of their energy on significant tasks instead of manually managing each overdue account. The collection software program automatically generates task lists for employees to work on for each overdue account. Tasks that are initiated and assigned by the software program only need to be completed and documented by the debt collector.
Having more time and energy to focus on the aspects of debt collection that require more analysis and critical thinking means that a company's AR department employees will be more efficient when it matters most. Your company may even be able to reduce the size of the AR department when more of its processes are automated through software solutions. There will be commensurate savings in the company's administrative costs by minimizing the size of the AR department.
With an effective collection system in place, a company may not have to turn to a collection agency to get overdue invoices paid. This means that the company gets to pocket a bigger portion of the payments that are collected without having to pay the collection agency a fee or commission. Companies also avoid the potentially negative press from working with debt collection agencies that engage in questionable consumer debt collection practices.
In addition to speeding up the collection process and eliminating more bad debts, collection software solutions allow companies to more selectively outsource outstanding accounts or replace the work performed by a collection agency. This means that the company can quickly and accurately identify which accounts are ripe for serious collection efforts and are most likely to result in recovery for the company. The AR department will waste fewer resources on pursuing overdue accounts that are the least likely to be paid.
Making sure that a business collects on all invoices is important, but it is equally important to maintain good customer relations. It can be aggravating for a customer to receive a payment reminder notice before their invoice is due. It is just as damaging to a customer relationship if the company generates an invoice with mistakes.
Automating the collection process minimizes human errors in the payment tracking process. Your company will be less likely to generate duplicate invoices or misapply customer payments. Debt and payment tracking software collects all relevant information about customer accounts so that nothing important is lost in translation between different employees working on the same accounts.
Another benefit of using debt collection systems is that customers will appreciate accurate and responsive information about their account status. Customers will also have instant access to payment options so that they can make a payment as soon as they receive a payment reminder from the company. Customers are less likely to miss a payment when they receive timely payment reminders that are accompanied by a convenient payment portal option.
One of the most critical aspects of a company's cash flow management and long-term sustainability is how effectively it collects on customer debts. Debt collection does not always get the attention and analysis that it deserves. Using a debt collection software system can help a company reduce bad debt write-offs, collect money faster, increase efficiency and economy, improve profitability and maintain good relationships with customers. Introducing automation into a company's debt collection process makes it more cost-effective and accurate in all aspects of tracking customer payments, managing overdue customer accounts, collecting customer payments and documenting debt settlement agreements.
Chetu does not affect the opinion of this article. Any mention of a specific software, company or individual does not constitute an endorsement from either party unless otherwise specified. This blog should not be construed as legal advice.
Founded in 2000, Chetu is one of the leading software development companies, helping clients with solutions and support services. Chetu's specialized technology and industry experts serve startups, SMBs, and Fortune 500 companies with an unparalleled software delivery model suited to the needs of the client. Chetu's one-stop-shop model spans the entire software technology spectrum. Headquartered in Plantation, Florida, Chetu has fourteen locations throughout the U.S. and abroad.