Business Process Management

What Is A Debt Management & Collections System?

March 30, 2022

By the end of 3Q21, consumer debt reached an eye-watering $15.4 trillion and corporate debt wasn’t far behind at an astonishing $11 trillion. With no signs of slowing, the escalation of money owed is leaving many households and companies struggling to make payments. In the wake of the pandemic there’s been a surge in payment delinquency. Whether you’re a small and medium-sized business (SMB) or a large enterprise, one thing is certain – collecting unpaid debt is time-consuming and certainly not enjoyable. This is where a debt management and collections system can help keep your revenue flowing.

Why Debt Management is Important

Generating sales is fundamental to keeping your business profitable. However, on the flip side of new sales is collecting money owed once a prospect becomes a customer. Whether a consumer or a business, we can safely say that most do everything possible to pay money owed. Unfortunately, in today’s environment of mounting debt, payments are increasingly becoming delinquent.

When debts become delinquent, it’s the responsibility of your accounts receivable (AR) department to handle all things associated with recovering the money owed. This process is not only time-consuming but when handled manually can result in errors that leave money uncollected.

A debt management and collections system eliminates manual effort, reduces errors, and improves your ability to collect unpaid debts. While AR personnel are primary users of the system, it also benefits the company as a whole. Here’s a breakdown of the three primary areas that use the system.

  1. Company: To improve cash flow, companies need an understanding of the accounts at risk, the total amount of revenue past due, and aging balances. This information needs to be up to date and readily available to ensure action can be taken with minimal involvement.
  2. Collection Manager: To ensure that collection processes and strategies are consistently applied across all delinquent accounts, it’s important that your collectors’ progress is systematically and accurately tracked.
  3. Collectors: To boost collector productivity, companies need tools that prioritize accounts in need of attention, automate notifications and alerts, and streamline interactions with customers.

While delinquencies are a fact of life for any company that collects payments, the right debt management and collections system enables you to streamline the debt management and collections process, improve cash flow, reduce collection cycles, and enhance the customer experience. And the benefits don’t end there.

Advantages of a Debt Management and Collections System

The receivables and collection processes are complex and laborious; however, a debt management and collections system eases the burden while providing significant advantages.

  • Receive payments faster: An integrated debt management and collections system enables companies to automate notifications and alerts, streamline the payment process, and provide customers with convenient payment options.
  • Centralize data: Whether you’re currently using Excel spreadsheets or other manual processes, customer payment and delinquency information is likely spread across multiple records and not accessible by everyone on your AR team, resulting in conflicting data. A centralized source of data eliminates manual effort, providing for more accurate and consistent data.
  • Boost efficiency: Automation eliminates the need to manually run AR aging accounts or manually review records for delinquencies, providing AR resources with the ability to focus on other critical tasks such as pursuing overdue accounts with the best likelihood of being paid.
  • Improve payment forecasting and cash flow: With the ability to collect, analyze, and share consistent data, you’re better able to determine days sales outstanding (DSO) rates, turnover ratios, collection effectiveness, and much more.
  • Reduce bad debt write-offs: Automating the debt management and collections process enables you to follow up on delinquencies on a more proactive basis, enabling you to resolve disputes sooner and prevent them from reaching a point where they become uncollectible.
  • Increase profitability: The right debt management and collections system may make it possible to avoid using a collection agency, which eliminates sharing a percentage of the payment obtained, as well as fees or commissions.
  • Improve customer satisfaction: Automation minimizes human errors, ensuring that the invoices, payment reminders, etc. contain all the relevant information, are sent on a timely basis, and are error-free.

A purpose-built debt management and collections system eliminates common challenges such as losing track of aging balances, not having the information needed to know total delinquency amounts, and relying on inaccurate or incomplete data.

Simplify Collections Management

You need a better way to manage collections. One that will minimize bad debt write-offs, enhance employee productivity, and improve customer satisfaction. With the right debt management and collections system (one that combines billing, dunning, and collections in a single solution) you’re able to proactively manage collections, reduce days sales outstanding (DSO), and improve your cash flow.

CollectionsCloud from BillingPlatform is an automated software solution that does just that. To illustrate how CollectionsCloud can automate the collections processes, let’s follow a typical collections scenario.

  • A customer account is 7 days past due. At this point, a trigger is automatically generated to send an email reminder.
  • An additional week has gone by without payment. The account is now 14 days in arrears, generating a second trigger for a call to be made to the customer.
  • The customer agrees to make the minimum payment due within the next 5 days, and promise to pay details are noted on the customer’s account.
  • The promise to pay date has come and gone, with no payment made. At this point two triggers are generated, one to suspend the account and another to send a second email notice.
  • Three days later payment is made, which initiates another trigger to restart service.

With CollectionsCloud, you gain more control over outstanding invoices. The Collector Dashboard provides a comprehensive view of outstanding accounts, including a prioritized list of accounts that require immediate attention. For customers who are delinquent, collection strategies can either be fully automated or have a mix of automated and manual strategies. Strategies can also be tailored to customer segments based on predefined parameters and performed at predetermined intervals after an account enters collections.

Realize the Power of an Automated Debt Management and Collections System

Are you ready to put your debt management and collections processes on autopilot? With BillingPlatform, you’re able to reduce DSO by up to 20%, increase productivity three-fold, and decrease churn by up to 15%. With us as your debt management and collections partner you get an integrated financial ecosystem that enables you to minimize revenue loss, collect money faster, improve profitability, optimize employee productivity, and enhance the customer experience. Talk to our team today and learn more about how CollectionsCloud gives you the power to automate collections, dunning, notifications, and much more.

 

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