How to Automate the Collection Process?

May 30, 2022

You’ve probably heard the saying that time is money. Few things illustrate this principle as well as when collecting payments. The sooner you get the money your customers owe, the lower your financial risks and the better your financial position. So, what can you do to increase cash flow and reduce your DSO? Is collections process automation the correct answer?

How To Tackle B2B Collections Automation

When determining how to improve the collections process, technology immediately comes to mind. Automation streamlines even the most complex processes in an organization. However, a lot of prep work goes into choosing the best systems and implementing their use.

1. Identify Your Needs

What are you looking for from collections management automation? What are some of the goals you hope automation will achieve for your business and your team? Keep this information in mind as you work through the process. It will reduce the risk of getting swayed by bells and whistles that do not necessarily meet your objectives.

2. Secure Buy-In From Key Stakeholders

Managers often make the mistake of only securing buy-in from the higher-ups. However, the people who use the software every day are just as important. If they are not on board with the transition, resistance to automating the collections process could reduce the effectiveness.

3. Research Available Software Options

Some software companies position themselves as generalists. They produce software that can automate collection processes across all industries. However, technical fields are often not well-served by these organizations. So, also consider looking for a company that specializes in your area.

For example, Gaviti works with companies in the following fields:

Transportation and logistics
Wholesale and distribution
Business services
Manufacturing
Technology

4. Choose Your Automation Software Provider

What features will help you achieve the automation goals you identified in step one? You might find that several companies have features you need and then some. Compile a shortlist to determine who might best serve your needs. Then, check customer reviews and general reputation to choose the right fit.

5. Ensure Adequate Training

Do you want employees to receive training all at once or gradually? How much time can they realistically dedicate to learning a new system? Even if you have the most tech-savvy team and high employee buy-in, training is a critical part of the process. It will help you avoid trouble as you make the transition. Work with your software provider to create a training schedule that works for your team.

6. Pilot Test and Implement the System

Before making a long-term commitment, test the system. Request feedback from your testers and adjust your implementation plan. After launching, work with your software provider to ensure a smooth transition. Then, continue to make adjustments based on user feedback and team performance.

How Leveraging Technology Improves the AR Collections Process

Automation and other forms of technology have changed the way businesses operate forever. Even more fascinating, small businesses have remained at the forefront of adopting many of these changes. Here are some of the many ways collections management automation can improve processes:

Managers can access real-time analytics that they can use to monitor the business’s performance in several areas.
Automation facilitates virtual payments and other online services that increase convenience for your customers.
Customer service portals make it easy for customers to pay however they want and retain control of their AP process.
Automation assists employees with time-consuming and tedious tasks.
Automation increases cash flow, boosts productivity, and reduces the need to write off debts.

How To Further Improve DSO and Cash Flow

Your team can use automation to accomplish almost every AR objective, but that depends on how you use the system. Consider these best practices for ensuring you get all the benefits you bought the system for in the first place.

Choose Your KPIs Wisely

You will have no shortage of options for key performance indicators you should monitor. Cash balance and days sale outstanding are only the beginning. Here are some additional metrics to consider:

Outstanding receivables
Accounts receivable aging
Customer churn rate
Percentage of late payments

Set Up Payment Plans

Consider using your automation software to set up payment plans for customers who have difficulty paying their debts fully and on time. Doing this will help you get paid while maintaining a good relationship with your customers.

Establish Credit Management Policies

One of the best ways to improve collection performance is to be selective about who receives credit and how much they receive. Review your policies to ensure you’re doing everything possible to reduce risk.

The Bottom Line

Technology has changed the way businesses operate, and automation is at the forefront of that change. By automating your collections process, you can improve cash flow, boost productivity, and reduce the need to write off debts. Find out how Gaviti can help you achieve this and more.