Even if your finance department has a dedicated collections team, the manual processes involved in chasing payments can take valuable resources away from more meaningful work.
Past due invoices are a challenge for many businesses. Over one-third of invoices in the U.S. aren’t paid on time. And it’s not always the customer’s fault–a whopping 11% of invoices are unreceived or get lost in the spam box.
The good news is that there’s a way to bypass many of these common challenges around payment collections: Automation.
Why You Might Need Automation for Collections
The most common reason to automate your collections is to support your amazing accounts receivable staff. The paper and legwork required to chase outstanding invoices and collect payments are overwhelming and expensive. Automation can reduce the cost of manual data entry by 70% while cutting down on payment processing time. In fact, investing in automated payment solutions can reduce your payment cycle by up to 80%.
But there are other reasons to automate collections, too. Improved accuracy, enhanced data, better security, and detailed audibility are all key features baked into AR Automation. At the same time, automated collections processes are easier to scale compared to their manual counterparts, making them ideal for rapidly growing businesses.
6 Ways to Automate the Collections Process
There are a few things to consider if you are planning to pursue collections automation. Without the right approach, it can be difficult to get buy-in from your team. Furthermore, failing to consider all of the aspects of the collections process can considerably slow down your implementation.
Here's what we recommend:
1. Understand your billing software integrations
Often, your billing software or ERP system will determine what solutions are available for AR automation. That is why reviewing your billing software and any potential integrations is a critical step. More likely than not, your organization will want to stick with its current ERP system. And that's fairly normal. However, you will also want to review potential integrations that can automate collections activity, as well as similar manual processes, such as accounts payable tasks.
2. Invest in electronic invoicing
Next, you'll want to transition to electronic invoicing, which will save you time and money in the long run. Ultimately, it will be impossible to set up an automated collection process if your invoicing system is still manual. Sending an electronic invoice means that individual customers can pay you directly. No more waiting for checks in the mail.
3. Provide a self-service experience
The easiest way to reduce your workload in the collection process is to provide a self-service, online customer portal. Not only can customers pay with their preferred method, but they can also pay multiple invoices at once. Customer invoice portals provide more than an enhanced customer experience. They also ensure that you get paid faster.
4. Make payment easy
The collection process is shorter when the payment process is easier. Self-service portals are a part of that, but it's also important to choose payment methods that are convenient for your customers. Credit cards, debit cards, and ACH payments can all be automated. Depending on your business model, you may also want to consider subscription billing, which regularly charges the customer and reduces time spent recreating identical invoices every billing period.
5. Schedule automated follow-ups
Schedule automated payment reminders, which can be customized for different customer or payment plan types, and send across email, text, phone calls, and postal mail. This is a critical step in automating the collections process, and it will allow the collections team to focus their energies on key exceptions.
6. Optimize with refine
Finally, even after you have implemented an automated process for collections, it can always be improved. As you collect data about your payment and collections process, you can learn more about how individuals or segments of customers are paying. This, in turn, helps you to fine-tune your collections strategy and improve the overall AR process.
Leverage an Automated Collections Software
It's time to pull the plug on overdue invoices, time-consuming collection calls, and bad debt.
Learn more about how you can put your collections activity on autopilot here or schedule a demo with our payment experts today.