Improving Your Dunning Strategy and Recovery Rate

September 19, 2022

Finance teams and leaders are well-acquainted with the concept of automation and how it enables sweeping transformations across financial functions. Although the concept has been met with skepticism from some circles (largely related to the administrative red tape and regulations surrounding finance transformation,) pushing for digital innovation has become a top priority for CEOs.

As the pandemic illustrated, the status quo cannot be maintained. Companies must always be growing, evolving, and exploring new solutions. In particular, we’re seeing automation become the norm in accounts receivable (AR) functions, with teams seeing immediate results from streamlined collections processes and improved cash flow.

Across the board, new AR management solutions can help companies get a grasp on their collections strategies, from analytics tracking to dunning strategy to recovery rates.

Track the Metrics That Matter

With as many as 93% of accounting teams experiencing delayed payments, it’s clear that companies across the board have plenty of work to do in improving their recovery rates. Monitoring AR metrics like days sales outstanding (DSO) is one of the best places to start. Without the right data at hand, CFOs and finance leaders are missing out on a gold mine of opportunity.

There’s a reason that DSO is a critical metric for finance teams: It’s telling of the order to cash cycles and cash flows, directly impacting the financial health of firms. As we know, the longer invoices stay overdue, the less likely they are to be paid. This emphasizes why it’s important for CFOs and accounting teams to deploy an automated dunning process around collections early on, in order to not have invoices in aging buckets. This solution is chief among our recommended dunning process best practices.

Advanced automation platforms leverage artificial intelligence (AI) and machine learning (ML) techniques to analyze data and offer predictive insights. From predicting invoices most likely to be paid on time to customers most likely to make delayed payments, these transformative technologies offer critical insights to help AR teams make informed decisions.

And the effects can be drastic. Automation is seen to dramatically improve DSOs by as much as 23 days among businesses that handle 20,000 monthly invoices on average. In fact, 64% of firms report an improvement in their DSO following automation. Clearly, dunning for automatic payments should be a priority!

In our view, automation is the single most powerful improvement a company can make to improve dunning management and recovery rates.

Get a Handle on Your Customer Experience

Your dunning procedure is important, but more broadly, companies need to understand how each interaction with customers affects brand image. This includes the billing and payment process. While B2B clients may not start packing the moment they encounter a below par customer experience, it still is indicative of how your company treats clients and can even become a competitive differentiator when done right.

Here, we’re focusing on your dunning process and how you can leverage automation to deliver more positive customer experiences. Digital portals give customers complete flexibility to manage payments anytime, anywhere. They cut through any need to have constant back-and-forth queries and offer a comprehensive way for customers to manage payment-related tasks.

Additionally, these solutions can provide an important layer of security not found in non-digitized environments. Many clients fall for email scams run by individuals impersonating vendors or senior executives requesting payments, only to realize that they have been hoodwinked.

Automation reduces the risk of email scams, data manipulation, and other fraudulent activities, as there is no manual data entry involved and clients can securely pay on the designated portal which has limited access. Digitally transforming your AR process allows for smoother invoice processing, more accuracy, fewer hiccups/escalations, and a more positive customer experience overall.

A better customer satisfaction score simply means better retention rates due to the numerous ways it allows customer experience teams to manage client details and ensure their satisfaction across all interactions.

The Critical Role of Automation in AR Efficiency

Automation has numerous benefits, many of which will directly impact everyday operations. From transforming operations to uncovering opportunities to drive additional value, finance teams shouldn’t shy away from digital innovation.

More companies are seeing how AR automation can support back office tasks such as record keeping, monitoring discrepancies in payments, tracking overdue invoices, following up with clients, monitoring cash flow, and more – all contributing to an AR department where teams are free to focus high-value tasks that need human intervention.

By doing so, companies can automate what should be automated and take a personal approach to their customer management. This joint effort provides a blend of efficiency and personal connection that supports quick, effective collections across the board.

For a deeper dive on how transformative technologies like AR automation can improve your company’s ability to get paid, download our whitepaper: The Era of Digital Transformation for A/R Teams Is Now.