When you run a business, you must get paid for the work you do — period. But according to survey data gathered by Atradius, 43% of responding companies claimed that their credit-based business-to-business (B2B) sales were overdue, with 5% of these “long-overdue” invoices eventually being written off as bad debt.
This unfortunate reality is why your dunning efforts — whether handled internally through accounts receivable (A/R) processes or externally through collectors — need to be done consistently and efficiently.
Artificial intelligence (AI) can be invaluable in achieving that goal.
In this article, we’ll further explore the role of AI in collections, its overall benefits, and some of its corresponding challenges.
How is AI used in dunning and debt collection?
Given the versatility of AI — technology that accelerates or replaces tasks and decisions previously handled by humans, among other things — its actual impact on debt collection tends to depend on which underlying technologies are being used. It may assist with identifying risks, crafting customer correspondence, optimizing payment-adjacent processes, or all manner of functions.
As it currently stands, AI isn’t being broadly leveraged to support collection efforts, but where it is, some of the most common use cases include:
1. Predictive modeling helps avoid risk and prioritize problem accounts
AI is particularly good at detecting patterns. And when you can leverage predictive analytics to forecast customer behavior based on payment records and credit histories, you can often modify your tactics between those customers that are likely to pay with a simple reminder and those that might need additional incentive.
2. Automation lets you accelerate common processes
AI can help further streamline your automated debt collection efforts, allowing you to offload more complex tasks onto the technology. For example, dunning messages can be scheduled to match custom triggers, adapting tone, language, and frequency depending on the situation.
3. Natural language processing powers virtual agents and simplifies communication
When your support chatbots can comprehend the nuance of conversational language from account holders, you can rely on the AI to handle routine customer interactions and inquiries, only escalating to human agents as needed. Similarly, you can leverage this technology alongside generative AI to assist your customer support teams in active conversations, delivering messaging or process suggestions in the moment.
4. Real-time monitoring that promotes compliance and consistency
Operational anomalies can place your financial efforts at increased risk, often suggesting an unintended mistake or a broken process. However, with AI actively tracking your collection procedures as they’re performed, it can alert your staff to these exceptions, letting you review and react quickly.
Benefits of using AI in Collections
Depending on the AI technologies that you leverage, as well as the individual platform or application, your results may vary, but some advantages you can typically expect include:
AI promotes collection efficiency and automation at scale
The very point of technology is to make work easier, and AI and automation accomplish just that. Even better, these tools are designed to easily scale as your business and workflows grow. So, when overdue invoices spike, your collection AI will be able to readily meet this increased volume, requiring at most some additional processing power — meaning you don’t have to hire, onboard, and train new staff.
AI can improve collection recovery rates and cash flow
The accelerated processes made possible by AI let you be more reactive to and consistent with debt holders, encouraging prompt payments and cutting out unnecessary wait times. In addition, as you customize strategies and messaging based on what’s most probable to work, you can boost recovery rates, accelerate payment timelines, and net more consistent, reliable revenue streams.
AI can enhance payment compliance and reduce risk
As previously mentioned, AI excels at real-time monitoring, keeping you well apprised of what’s always going on in your A/R and debt collection efforts. As such, you’ll be able to realize when errors or exceptions occur and react to them immediately, preventing any of these issues from spiraling out of control or causing further, downstream complications.
AI can better customer experience through personalization
Chasing after outstanding invoices or debts can be challenging. Often, your communications need to be simultaneously professional, clear, empathetic, and assertive. And the balance between these tones will and should shift depending on where the discussion is within the collections cycle. Fortunately, AI can assist in predicting which messaging style, frequency, and medium (e.g., phone, email, text) are most likely to solicit a prompt response.
Challenges of AI debt collection
Of course, just as with every technology investment, there are always corresponding costs. Your AI platform or AI-powered tools will only be as effective as the quality of the underlying information you have at hand. So before you begin, you’ll want to spend the time, money, and energy to consolidate your data pools, clean up and standardize records, and ensure that you have in place a tightly integrated enterprise resource planning (ERP) and back office environment.
At the same time, the use of sensitive financial and customer information is often heavily regulated, so you’ll be inviting increased oversight and will need to take additional measures to comply with established privacy standards. Similarly, as you make your data more accessible to the AI solution, you’ll also be making it more accessible to scammers and criminals, demanding more robust anti-fraud efforts.
Finally, while AI solutions commonly use machine learning capabilities to learn from previous mistakes, that process takes time. The accuracy of any predictive models or generated content may take several iterations before delivering a consistently successful outcome.
The future of debt collection with AI
Much like with AI — and likely more so — any predictions we make should be taken with a grain of salt. If current trends continue, you should expect:
- Not only increased personalization when it comes to debt collection efforts but for the entire invoice-to-cash (I2C) process.
- AI-generated payment terms, credit rates, and collections messages that adapt based on behavioral profiles and current customer sentiment pulled from everyday communications.
- Predictive analytics will give way to prescriptive analytics, where your AI-powered solutions will both identify accounts before they become delinquent and recommend personalized actions you can take to encourage prompt payment.
- Routine communications will likely be offloaded onto AI-powered virtual agents, leaving collections staff to focus on the most complex billing situations, dispute resolution, and other areas that might still need a human touch.
Streamline Debt Collection with Invoiced
As AI becomes more commonplace, businesses should augment their A/R and collection efforts with solutions that leverage this technology — solutions like what we offer at Invoiced by Flywire.
Our Accounts Receivable Automation platform delivers streamlined billing workflows alongside a Smart Chasing feature that will consistently chase after your outstanding payments without direct human oversight, cutting down your debt collection timelines.
At the same time, you can take advantage of our CashMatch AI and Remittance Advice AI capabilities to ensure that when you actually do receive payments, they’ll be applied to the correct invoice, balance, and account in moments.
To modernize your debt collection efforts and promote more consistent, reliable cash flows, schedule a demo of our software today.
