Tweaking Collection Methods to Get Paid Sooner

Among all the important tasks CFOs and collectors juggle every day is trying to reconcile accounts due. There may be more pressure this year than ever on your credit and collections efforts.

Collection Method Changes

Bottom line: How a company divides collection workloads may need an adjustment.

A recent survey by the National Association of Credit Management (NACM) asked credit & collection professionals how they assign workloads:

• 42% do it based on collectors’ skills, such as the ability to speak more than one language or to handle complicated relationships
• 29% assign accounts depending on the customers’ location, and
• 16% do it a certain number of customers to even out workloads fairly.

A Tweak, Not an Overhaul, May Be That’s Needed

There’s no right way of doing it as long as benchmarks are met. (Benchmarks may be keeping days sales outstanding at or below the industry average, for example.)

When those benchmarks aren’t being set, a tweak may be all that’s needed rather than a radical shift in credit and collection strategy. Credit managers shared some of their ideas on a recent NACM “Extra Credit” podcast. Here are some things they’re doing differently to improve collections:

Assigning one collector to one sales rep

This helps develop a rapport and helps get accounts collected sooner. The sales rep automatically knows who to go to for an extension of credit, for example, when handling a customer, and doesn’t waste time and effort to determine “whose account is this?”

Accurately gauging collectors’ stressors.

Managers need to know what’s overwhelming their staffers. Don’t assume it’s the number of accounts. By the same token, collection staffers need to know it’s on them to speak up and be honest about their current stumbling blocks. There may be a simple fix, such as switching a challenging account to another collector.

Setting up automated payment reminders.

Depending on how many small accounts a collections team is handling, automation helps reduce phone tag. Anecdotal evidence shows customers don’t like taking phone calls about debts any more than collectors making them.

Leveraging Data Analytics for Predictive Collections

Data analytics can provide valuable insights into payment trends, allowing credit managers to anticipate potential collection issues before they arise. By analyzing historical payment behaviors, businesses can identify high-risk accounts and adjust their collection strategies accordingly. Predictive analytics can also help prioritize accounts that need immediate attention, improving efficiency and effectiveness.

Offering Flexible Payment Options

Sometimes, late payments are due to customers facing temporary cash flow challenges. Companies that provide flexible payment plans or alternative financing options may find it easier to collect outstanding balances while maintaining positive customer relationships. Digital payment portals with self-service options can also streamline the process and encourage on-time payments.

Regularly Reviewing Credit Policies

In an evolving economic landscape, credit policies must be reviewed and updated regularly. Organizations that frequently assess their credit risk tolerance and collection strategies can ensure they remain competitive while minimizing bad debt. Establishing clear, consistent policies that align with current business conditions can help maintain financial stability.

Strengthening Customer Communication

Maintaining open and proactive communication with customers is essential to successful collections. Sending early reminders before due dates, providing clear invoices, and ensuring customers understand payment expectations can reduce the risk of delays. A strong relationship with customers can also encourage goodwill and make negotiations easier if issues arise.

Key Takeaways

Improving collections doesn’t necessarily require an overhaul — small adjustments can make a significant impact. Whether through reassessing workload distribution, automating reminders, leveraging data insights, refining credit policies or strengthening customer communication, CFOs and collection teams can enhance efficiency and cash flow. The key is to remain adaptable and proactive in addressing challenges before they escalate into major financial concerns.