Are you a Credit Manager who has been asked to reduce DSO's and at the same time reduce your cost per collection? Companies the world over are under pressure to improve cash flow whilst also cutting costs. As a result, accounts receivables teams are under pressure to collect outstanding accounts quicker and more cost effectively. Achieving this when the % of overdue customers is increasing and staffing budgets are being cut may sound impossible. This is where technology can make a difference.
Accounts Receivables Challenges
Many of the businesses I come into contact with have these things in common:
- a very small accounts receivables team;
- too many outstanding accounts at month-end for the small accounts receivables team to contact all of them by phone;
- increasing costs; and
- staffing issues.
As a result of these issues, many accounts receivables teams simply can't make contact with all outstanding accounts each month. As a result, the lower value accounts (which usually account for the higher volume of accounts) are skipped so that the staff can concentrate on collecting outstandings from higher value clients. This is where technology can help and make a substantial difference.
Accounts Receivables Process - without automation
Here's a real life example from a client of ours which illustrates their accounts receivables process prior to implementing our technology:
Their process breaks down like this:
- invoice is sent with 14 days to pay;
- once a customer is 7 days overdue, they're sent a reminder letter;
- once a customer is 21 days overdue, they're sent a "stronger" reminder letter;
- once a customer is past 29 days overdue, they're sent a "warning to disconnect" letter; and
- once a customer's payment is more than 30 days overdue, the company then attempts to contact these overdue customers by telephone.
NB. This process has a couple of main issues:
- You can see that 8,000 -10,000 customers were overdue with their payments each month, and 2,000 were going past 30 days overdue. This means that this company needed to contact 2,000 customers by telephone to collect payments, which they simply didn't have the resources to do; and
- The reminder letters were being sent manually (ie. the mail was produced manually in their office) which often meant that the mail often didn't make it into the Australia Post network the same day, resulting in mail delivery delays.
Now let's look at the scenario with our accounts receivables automation technology in place.
Accounts Receivables Process - with automation
After consulting with this customer extensively, we implemented a level of automation using technology in their collections process, which now looks like this:
Their new accounts receivables process now breaks down like this:
- invoice sent to customer with 14 days to pay;
- once a customer is 7 days overdue, they're sent an SMS message;
- once a customer is 21 days overdue, they're sent an automated telephone call using our voice broadcasting service, voiceREACH;
- once a customer is 29 days overdue, they're sent a "warning to disconnect" letter using our bing Postal Mail service;
- once a customer is more than 30 days overdue, they are again sent an automated voice broadcast call, and then the remaining customers are called manually by the accounts receivables staff.
NB. The impact of the changes to their process are as follows:
- invoices and reminder letters are delivered faster because they're using our on-demand desktop postal mail service (bing);
- the reminders sent by sms and voice broadcast are instant (as opposed to postal mail which usually takes 2-3 days) and also have more impact that postal mail because they're delivered right to the customer's handset;
- the number of accounts that reach the 30+ days overdue stage are far less at around 400 instead of 2,000;
- the use of technology means that the staff can now focus their efforts on the high value debt; and
- the cost per collection is substantially reduced because sending sms or voice broadcast calls are far cheaper than postal mail.
How will your customers react?
Are you concerned that your customers may not like the automated voice broadcast calls or sms reminders? Many of our customers were nervous that this would be the case. Our experience has shown however that if the messages are well scripted their impact is nothing but positive. Furthermore, they can express a level of importance and urgency which is hard to get across by postal mail; and they are 100% consistent day-in and day-out which is a very hard thing to achieve for a call centre.
More Info
Each business and customer base is different, however the challenges many businesses face are consistent. If you're interested to know what our technology can do for your finance department, please give us a call to arrange a meeting.
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written by american roulette , March 10, 2009
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