The Secret to Automating Collections without Losing the Human Element
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The Secret to Automating Collections without Losing the Human Element


Managing accounts receivable is about managing relationships. And with any business, some relationships are good and others are not so good.

Often times, finance executives and managers tend to oversimplify the A/R process. There is a stigma associated with “collections,” that it is somehow unworthy of the finance executive’s time and effort. This is a fallacy, and great financial managers know to avoid it.

When A/R is dragging and the number of invoices over 90 days old is becoming a burden on the business, many financial managers will suggest that the A/R team simply make more phone calls, or work harder. This suggestion never works.

Here’s why: to say that an A/R manager can just make more phone calls in a given day and collect more money is to say that the A/R manager is otherwise not doing their job.

The A/R manager is responsible for making sure money is collected that that the check is applied the appropriate invoice. Ultimately, there are only so many calls one person can make or emails one person can send in a given day.

Suggesting that the collector “make more phone calls” will not lead to results. The collector is making as many phone calls as possible already! This is poor strategy.

So how does a financial manager influence collection rates without over-taxing the A/R staff’s time?

The answer: Automation

The Human Element of Collections

Before we uncover how to take human interaction OUT of the collections process, let’s discuss first how important human interaction is in managing the A/R for a company.

As we mentioned, business is about relationships, and the collections team has an integral role in the relationship with a client. Think of the collections team as an extension of your own customer service department.

If your company defines collections success by the speed at which money is actually collected, its more likely that including an element of service to your effort will provide a marked improvement in collections rates.

Humans like to deal with humans, and the more you can incorporate smart human interaction in your sales effort, the better the effect will be on your cash flow from both a sales and collections perspective. This means only focusing on the human interaction that is necessary.

Remember, however, that people are also busy – especially your customer’s accounts payable department. So, if you can make paying bills very easy for your customer, or if you can painlessly remind them to pay their bills, then you are doing them a service.

Some customers will pay on time and on their own accord, these customers should be left to their devices with little encouragement. When the human element of your receivables efforts (phone calls or emails) is focused ONLY on those accounts and customers that absolutely need to be contacted, you are doing your customer a favor and your receivables department is much more efficient.

So how do you zero in on the most important human actions?

Look for Places Where Human Actions Are Redundant

It would be nearly impossible to automate an entire collections effort. Some parts, like phone calls, have to be done by a human. The rest of the process, however, contains many tasks that do not need to be performed by a human.

As a financial manager it is your responsibility to identify those tasks that can be automated, and to limit the number of the human interactions to only those that are absolutely necessary.

You can start by looking at a day in the life of one of your collectors…

Are the customers invoiced manually? Use eBilling and automate paper invoices.

Does the collector have trouble deciding which customer to call first? Are they depending on the aging? Use a platform that prioritizes receivables based on who is most willing to pay.

Is there a schedule for  how to reach out to customers, when to send emails, etc.? Make a policy that guides the collectors actions.

Once you have identified the manual processes that are creating drag for your receivables process, you can identify ways to automated them so your collections team can focus on only those tasks that matter. This is where you will become a rock star for your collections team.

Quick tip: One easy way to identify opportunities to improve is to track time, not because you want to know how much people are working, but because you want to know what they are working on. Toggl is a great app that can help you manage time for a team.

Automate the Actions that are Taking Too Much Time

We all know the advantage of using cloud-based platforms: it’s cheaper, it’s more efficient, it’s less complex, etc.

There are a host of cloud-based platforms that can help you automate the redundant and manual process in your receivables effort.

Spending too much time on manually invoicing? Use Freshbooks or Xero to automate it.

Are the collectors focusing on the wrong customers and using the wrong tasks? Use Funding Gates to set the workflow for your collections process and to automate how you reach out to your customers.

In the construction industry? Automate your lien waivers and notices with zlien.

There are a number of platforms available, it is up to you to find which works best with your company’s process.

Measure the Policy

Automation is only as good as the policy that lies at its foundation. But understand that the policy you start out with may not be the best policy for your company. And if it’s not, that’s OK. You can always iterate.

If you intend to send an email to the customer at 20 days past due as a reminder to pay the invoice, measure the influence that the email has on the collection rate.

Alternatively, if your company is involved with a construction project, consider sending a demand letter (or a Notice of Intent to Lien if you’re in construction) at 60 days past due and measure how this affects your delinquent receivables.

In any situation, when your company automating processes, don’t be afraid to alter the triggers that guide process. This is how you can incrementally improve the results.

Say “Thank You”

It cannot be stated enough, business is about relationships and it’s important to show appreciation to your customers when they pay on time.

Some companies use dynamic discounting or better terms for early payments, Taulia is a great platform for this.

Other collectors send hand-written cards to the accounts payable counterparts.

Whichever method you choose, make sure to recognize your good customers, and acknowledge good behavior from your less responsive customers.

And by all means, try to stay human.

About the Author:

Martin is the Director of Business Development at zlien, a platform that reduces credit risk and default receivables for contractors and suppliers by giving them control over mechanics lien and bond claim compliance. A graduate of LSU, Martin was the VP of Feelgoodz and Co-Founder of GiftMEO before joining zlien. Martin interacts with company users and partners daily to help empower businesses to get what they’ve earned. He writes about cash management, best business practices, and how to implement technology in receivables management. Connect with him @themartinroth and LinkedIn

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