Business Process Management

What Is A Debt Management & Collections System?

December 04, 2023

By 2Q2023, consumer debt reached an eye-watering $16.84 trillion – an increase of 4.5% from the previous year. U.S. credit card debt and other types of revolving loans surpassed $1 trillion in August 2023, with outstanding balances on bank cards climbing to 18.1% above where they were in 2022. With inflation sticking around, the amount of money owed is leaving households and companies struggling to make payments. So 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 filled with challenges. This is where a debt management and collections system can help keep your revenue flowing.

Why Debt Management is Important

Regardless of the industry, companies are focused on increasing revenue from new sales. However, on the flip side of new sales is collecting money owed, and unless your business is a cash-only establishment unpaid debt can lead to cash flow issues.

When debts become delinquent, it’s the responsibility of your accounts receivable (AR) department to handle all things associated with recovering the money owed. Regardless of the size of your AR department, its collections operations and processes can result in errors that leave money uncollected.

By incorporating a debt management and collections system you can eliminate manual effort, decrease errors, receive money owed faster, and reduce bad debt write-offs. While AR personnel are the primary users of the system, it also benefits the company as a whole.

Here’s the three key areas that will benefit from a debt management and collections system.

  1. Company: To improve cash flow, companies need to understand 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 the appropriate action can be taken with minimal manual 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 and success rates, companies need tools that prioritize accounts in need of attention, automate notifications and alerts, and streamline interactions with customers.

No company can escape all payment delinquencies. However, the right debt management and collections system provides many benefits. You can 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 helps companies automate notifications and alerts, streamline payments and offer convenient payment options to customers.

Centralize data

Whether you’re using spreadsheets or other manual processes, customer payment and delinquency information is likely spread across multiple records. If everyone on your AR team can’t access it, this results in conflicting data and missed opportunities to collect debts as they age. A centralized source of data eliminates manual effort, providing for more accurate and consistent data.

Boost efficiency

Automation removes the need for people to manually review and process overdue account records. This frees up AR resources to focus on other aspects of debt collection that require manual analysis. Additionally, it provides them with time to purse payment for overdue accounts.

Improve payment forecasting and cash flow

With the ability to collect, analyze, and share consistent data, you’ll more easily determine days sales outstanding (DSO), turnover ratios, collection effectiveness and more.

Reduce bad debt write-offs

Automating the debt management and collections process enables you to regularly follow up on delinquencies. This enables you to resolve disputes sooner, reduce the number of accounts that require collection activity, and lessen the amount of uncollectible debt.

Increase profitability

The right debt management and collections system may help you avoid using a collection agency, which eliminates sharing a percentage of the payment obtained.

Improve customer relationships

Automation minimizes human errors, ensuring that 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. Problems can occur due to incorrect or missing data. Problems can also arise from not keeping track of unpaid amounts. Additionally, problems can arise from lacking the necessary information about overdue payments.

Simplify Collections Management and Improve Cash Flow

Regardless of the industry or size of your business, introducing a debt management and collections system enables you to 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 can proactively manage collections, reduce days sales outstanding (DSO), and improve cash flow.

Collections from BillingPlatform is an automated collections software solution that reduces collection cycles and improves cash flow. To illustrate how Collections automates the collection processes, let’s look at a typical collections scenario.

  • When a customer account is 7 days past due, a payment reminder is automatically sent.
  • If the account reaches 14 days delinquent, an automatic trigger is sent informing AR personnel to contact the customer.
  • The customer agrees to make the minimum payment due within the next 5 days, and the promise to pay details are noted on the customer’s account.
  • The promise to pay date has come and gone, with no payment received. At this point two triggers are generated, one to suspend the account and another that sends a second email notice.
  • Three days later payment is made, which initiates another trigger to restart service.

Collections from BillingPlatform

With Collections, you gain more control over outstanding invoices. The configurable Collector Dashboard provides everything your collectors need all on a single screen – from real-time status of all activities, through a prioritized list of accounts with actions due, to easy access to customer history – collectors can stay on top of their accounts and collect outstanding balances faster. For customers who are delinquent, collection strategies can either be fully automated or be a combination of automated and manual processes.

Collections strategies used can be tailored to different customer segments based on predefined parameters and performed at predetermined intervals. When collection strategies need to be fine-tuned, business intelligence provides real-time visibility into the performance of collection strategies and dynamically makes changes, ensuring you are always using the most effective strategies.

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’ll reduce DSO by up to 20%, increase productivity 3x, and decrease churn by up to 15%. With us, 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.

Don’t wait to get your debt management and collections system set up for success, reach out to our team of experts to see how we can help.

Share Post:

Related posts

5 Advantages of Using the Right Automated Billing System
Billing & Monetization

5 Advantages of Using the…

Did you know that 67% of businesses use automation...

Read More
What to Look for in the Best Collection Management Software
Debt Management and Collections System

What to Look for in…

Most businesses have an assortment of software solutions to...

Read More
Billing Software: What You Need to Know
Billing & Monetization

Billing Software: What You Need…

Described as software that enables companies to, at its...

Read More