Collections Management - 2021 Ultimate Playbook for The new role for collections teams in ensuring cash flow while safeguarding the customer ...
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2021 Ultimate Playbook for
Collections Management
The new role for collections teams in ensuring
cash flow while safeguarding the customer
experience.
Playbook Table of Contents
CHAPTER 01 ........................ 1 Ready to Deal With More Customer Web
Portals, Disputes & Deductions, and Longer
Introduction Payment Terms.
3.4. Team Effort in the New Economy
1.1. The New Economic Landscape is a
Means Frictionless Collaboration Between
Formidable Opponent.
You and Your Customer.
1.2. Adapt to Survive, Optimize to Win.
3.5. Collections is now a C-Suite Priority.
1.3. Cash-on-Hand Means More Time on
the Clock.
1.4. Accounts Payable is Already Using a CHAPTER 04 ......................25
New Playbook. Building a More Resilient Playbook.
4.1. Proactive Collections with Artificial
CHAPTER 02 ........................ 6 Intelligence.
Red Flags: Major Evolutions Taking 4.2. Touchless Connectivity with Buyer AP
Place Across Collections Portals.
Management.
4.3. Integrated VoIP Calling to Increase
Collector Efficiency.
2.1. Four Collections Trends That We
Noticed in 2020. 4.4. Collectors Will Start Playing an Active
Role in Dispute Management.
4.5. Custom Payment Plans, Easy Payment,
CHAPTER 03 ......................15 and Installment Options.
Key Changes to Expect in the World 4.6. Enable Customers to Pay Where They
of Collections in 2021 Are.
4.7. Instant Replay: Track Team
3.1. A Proactive Approach to Collections is
Performance in Real-Time to Improve and
Required to Win the Game.
Win the Long-Game.
3.2. Peeking Into the Accounts Payable
Playbook: Buyer AP Teams Will Keep
Pushing the Line of Scrimmage on Payment CHAPTER 05 ......................41
Terms.
Three-Point Field Goal, Make
3.3. Invoice Processing Automation: Get HighRadius Part of Your Team!
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| 2021 Ultimate Playbook for Collections Management
CHAPTER 01
Introduction
The game is changing for Accounts Receivable.
To support recovery from a historic economic
downturn and to keep pace with advances in
digital technology, collections teams will have to
embrace new strategies and prioritize securing
working capital and cash-on-hand.
1.1. The New Economic Landscape is a
Formidable Opponent.
Imagine your organization is a football team; under normal
circumstances, you function pretty well. Yes, there’s a small rivalry
between your star quarterback and one of your wide receivers, and
maybe your general manager is a traditionalist who takes a “don’t fix
what’s not broken” approach to strategy. Despite these small
quibbles, your team manages to bring in enough wins to stay beloved
and relevant to your hometown fans.
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| 2021 Ultimate Playbook for Collections Management
Then along comes a rival with completely new plays - the
likes of which you’ve never encountered. Everyone on
the opposing team appears to be bigger, faster.
Their playing style is strategically ruthless while
also being stealthy enough to avoid penalties.
Your usual way of doing things is no
match for the ferocity of this threat: key
players are sustaining injuries that could
put them out of commission for the rest
of the season or longer. By the second
half, the score is 10-40, your team’s
confidence is flagging, and the coach is
standing impotently on the sidelines
with his face in his palm.
To survive or even win in the second half, your coach will have to adopt a more
agile game plan, and your team will have to strive for cooperation across the
board. What worked in the past is irrelevant - now is the time to upgrade your
offensive strategy.
1.2. Adapt to Survive, Optimize to Win.
Before the massive economic impact of COVID-19, Accounts
Receivable (AR) teams at supplier-organizations were already facing
disruption. The advancing wave of Digital Transformation meant AR
departments saw a substantial increase in the volume of digital
transactions with customers. Post-pandemic, the growing
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| 2021 Ultimate Playbook for Collections Management
dependence on digital transactions and digital technologies has only
accelerated.
With AR departments, pressures related to
digital disruption, and the pandemic aside,
Collections Management faces additional
challenges. They not only have to follow up on
past-due receivables, but they also have the
extra pressure of being a key touchpoint for
the customer experience. Considered one of
the most critical interfaces a company has
with its buyers (customers), the collections
team is responsible for maintaining a positive
customer relationship while ensuring that
invoices get paid within agreed-upon terms.
Collections Management teams can further
struggle due to the complexity of internal business processes. For example, if an
organization fosters an environment where subpar information sharing and data
silos are common, collectors would lack a 360-degree view of their customers.
This could render their dunning strategy ineffective - and worse - lead to bad
customer response.
To support recovery from a historic downturn in the global economy,
organizations and AR teams will have to change how they approach receivables
and its impact on working capital and cash-on-hand. Using tools like Artificial
Intelligence (AI) and Machine Learning (ML) to optimize the collection of
receivables and lower DSO will be an even bigger area of focus across supplier
organizations.
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| 2021 Ultimate Playbook for Collections Management
1.3. Cash-on-Hand Means More Time on the Clock.
Recognizing that cash-on-hand is a strong deciding factor between
which businesses are dying or surviving in the new economy,
corporate executives and finance leaders are giving no indication that
they’re relenting in their expectations of the AR department—and
more specifically—collections teams. In fact, they’re expecting more
of them because collections teams are responsible for helping
organizations leverage their most valuable asset on the balance
sheet—accounts receivable.
In an extreme economic downturn, cash-on-hand is a business’s safety net.
During the global pandemic, organizations with access to liquid cash and
securities have been and continue to be in a better position to retain their
workforce, meet accounts payable, and continue servicing customers. A Wall
Street Journal report states that cash-rich companies can continue to run their
businesses for a year or more, even if they cut no cost or don’t make a single
sale.
In pre-COVID times, a company could
expect the majority of its accounts
receivable to be paid on time. Now, with
economic and operational disruption
everywhere, the rate of past-due
payments is increasing, and available
working capital is under threat.
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| 2021 Ultimate Playbook for Collections Management
1.4. Accounts Payable is Already Using a
New Playbook.
In the game of getting paid as quickly as possible, the line of
scrimmage rests between Accounts Payable (buyers) and Accounts
Receivable (suppliers). The AR department is interested in bringing in
as much cash from customers as possible, while Accounts Payable
(AP) is invested in extending payment cycles to keep working capital
within their company as long as possible.
Both departments are facing specific pressures
due to the economic downturn; however, AP is
showing signs of faring a bit better. A recent poll
provides a better than expected picture of how
well AP has handled 2020, with 63% of poll
respondents indicating little to no disruption of
operations due to COVID-19.
AP is moving ahead of the curve when it comes to adapting to marketplace
pressures that have been driven by Digital Transformation and the recent
pandemic. The global economic downturn means they will only invest more
heavily in the tools and technologies that are helping them hold on to cash. This
includes AI and ML assisted apps that predict optimized times to make
payments and automated invoicing software that looks for disputable invoices.
This will mean an increase in disputes, more time spent by AR teams in pulling
data from customer portals, and longer payment cycles.
Collections teams must be willing and prepared to deal with these changes with
the goal of making it as easy as possible for customers to make payment.
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| 2021 Ultimate Playbook for Collections Management
CHAPTER 02
Red Flags: Major Evolutions
Taking Place Across Collections
Management.
7.1% Rise in the Average Days to Pay as a
Result of Increasing Payment Terms and Late
Payments
15% decline in Customers Paying Monthly
Indicating Collectors Focusing on a Smaller
Subset of High Priority Accounts
21.50% Decline in Payment Commitment
Honoring: Don’t Take Your Promise-to-Pays
(P2Ps) at Face Value
More Aggressive Collections: 32.50% Spike in
Collections Dunning
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| 2021 Ultimate Playbook for Collections Management
Collections management focuses on two primary concerns:
1. Will a company’s customer pay at all?
2. When will they pay?
When responding to a global downturn in the economy, collections have a clear
and direct impact on an organization’s finance objectives and relationships with
customers. Given the extreme financial pressures being imposed on customers,
many of whom are facing challenging decisions when determining which bills
can be paid, a collection strategy today is not just about collecting money faster
but also about prioritizing relationship management across the customer
portfolio.
The research team at HighRadius parsed through AR collections data patterns
from 200+ industry-leading companies in our client portfolio. Our observations
are presented below to illustrate the state of collections in 2020.
2.1. Four Collections Trends That We Noticed
in 2020.
Comparing a period in 2019 (April – July) to a similar period in 2020:
• Average Days to Pay has increased by 7%
• Number of unique customers paying every month has decreased
by 15%
• Payment Commitment Honoring has fallen by 21.50%
• External Communication with Customers, Carriers, and Brokers
has risen by 35%
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7.1% Rise in the Average Days to Pay as a
Result of Increasing Payment Terms and Late
Payments
The graph shows a 7.1%
increase in the Average Days to
Pay (median) between April-July
in 2019 compared to the same
period in 2020.
Why We Looked at This…
To develop an objective understanding of what’s changed in the collections
landscape, the first data point our team focused on was Average Days to Pay.
Average Days to Pay is the average time it takes to close an invoice.
Average Days to Pay = the total number of days to pay divided by the number
of closed invoices for a particular customer.
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While an increase in payment cycle time was anticipated, our team noted that
HighRadius customers exhibited a lower increase in payment cycle time in
comparison to external industry benchmarks. We expected this number to be
much higher but were pleasantly surprised to see it only at 7.1%.
15% decline in Customers Paying Monthly
Indicating Collectors Focusing on a Smaller
Subset of High Priority Accounts
Comparing two periods: 2019
and 2020, the graph shows a 15%
decrease in distinct customers
making payments at least once in
a month.
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Why We Looked at This…
Since we saw a rise in Average Days to Pay, we looked at the number of
customers who are making regular payments.
Customers making payments = the number of customers paying every month,
specifically, from among customers who are supposed to pay in a month and
have completed at least one payment a month
The above graph shows the number of unique customers paying (median)
between the period of April-July in 2019 and the same period during 2020. The
data indicates a clear drop of 15% in the number of customers making regular
payments across industries.
In our experience working with over 200+ industry-leading companies, we’ve
observed a common trend where companies rely on an 80-20 approach to
collections activity. This means organizations are expending 80% effort
collecting on the 20% most crucial accounts in their portfolio. This results in
companies leaving a hefty amount of accounts receivable uncollected.
As a result of the pandemic, collections teams have switched focus towards
their most critical accounts (based on the customer’s credit limit, payment
history, accounts receivable balance, reference checks, etc.) thus contributing to
the drop in the number of customers paying.
Though this might have been acceptable in the short term, collection teams
must prepare themselves to scale their operations and increase their collections
customer portfolio coverage to 100% to survive in the new economy.
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21.50% Decline in Payment Commitment
Honoring: Don’t Take Your Promise-to-Pays
(P2Ps) at Face Value
The graph shows a precipitous
drop in Payment Commitment
Honoring in 2020 in comparison
to the same period in 2019.
Why We Looked at This…
One of the most important metrics that helped us understand the contentious
relationship that exists between AR departments and their AP counterparts
was the number of payment commitments honored.
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Payment Commitment Honoring is expressed as the percentage of payment
amount that was actually collected, to that was initially committed (promise-to-
pay) to the collector.
The above chart highlights the number of payment commitments honored
between the period of April-July in 2019 and the same period during 2020. It
illustrates a precipitous drop of 21.50% in the median value.
Many companies use payment commitments as input for their cash forecasting
models. If these commitments are not honored, it has a substantial impact on
their ability to forecast and manage working capital accurately.
Potential Causes for Payment Commitments Not Being Honored:
1. Collectors were under increased pressure to deliver and were
capturing payment commitments even when they were not fully
confident about those commitments being met by the buyers.
2. On the Accounts Payable side, a lot of buyers were unsure about
their cash flow and were making payment commitments to maintain
business continuity and definitely did not want their lines of credit to
get impacted.
3. Whether a buyer had the money to make a payment, or how high of
a priority an AR supplier was to a buyer. If a supplier sells something
non-essential, then a buyer can more easily opt to keep an invoice
unpaid while continuing to pay more essential suppliers.
This is a clear call-to-action for a system that enables collectors to analyze the
integrity of these payment commitments and truly understand the ability to pay
of each customer - this is far more important than an actual payment
commitment, which might not have any value.
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More Aggressive Collections: 32.50% Spike in
Collections Dunning
The graph shows a
substantial spike in collections
related communication in 2020
in comparison to 2019.
Why We Looked at This…
Finally, we wanted to understand how collections teams are reacting to the
trends detailed above.
Collections related communication = volume of correspondence, disputes,
payment commitments, and dunning activity for each customer.
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This chart highlights the volume of interactions and communications (number of
phone calls, emails, and correspondences, etc.) with customers, carriers, and
brokers between April-July between 2019 and 2020. It illustrates a sizable
spike of 32.50% in communications volume.
In response to market volatility, collections teams are getting more aggressive
with their efforts to collect payments ASAP. The economic uncertainty has
pushed collections teams to more aggressively focus on the 0-30 day aging
buckets as compared to the 60+ day bucket, which used to be a typical priority.
This may work in the short-term; however, it’s not sustainable over the long-
term for two reasons:
1. It is difficult to scale this activity (correspondence, disputes, payment
commitments, communications, etc) across the entire customer portfolio
without a collections management system.
2. A continuous aggressive collections strategy ruins the customer experience.
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CHAPTER 03
Key Changes to Expect in the
World of Collections in 2021
Digital technology is rapidly being adopted by
world-class organizations. Collections teams
need to be proactive about using technology to
remove friction from the accounts receivable
process.
The following is a summary of
what leading industry experts 2020 taught us that though
foresee in the new economy you cannot predict the future,
and the changing Collections you can still be prepared for it.
Management landscape.
Vice President, Credit and Accounts
AR leaders are starting to embrace Receivable at a leading manufacturing
enterprise
the reality that a new strategy is
required to ensure they win in
2021. This will involve reducing the
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cash conversion cycle by collecting payments faster and more cost effectively
while also focusing on strengthening customer relationships.
To accomplish this, collections teams must ensure that cash from a sale is
received within its due date according to payment terms to maintain a healthy
DSO (Days Sales Outstanding) and to meet a company’s obligations of
safeguarding working capital.
3.1. A Proactive Approach to Collections is
Required to Win the Game.
Historically, collections
teams have depended on a As our workload increased
reactive dunning model. during COVID, we would not
This meant waiting for have been able to keep up with
customers to become past- the collections and reporting
due before signaling
without a robust collections
management system.
collectors to reach out to
them. In the new economy, Marinko Marijolovic, Director, Corporate
waiting for an invoice to go Credit Services at ShurTech Brands, LLC
past-due before acting on it
is akin to casually sipping
water on the sidelines and only jumping into action after you see a
runner back from the other team heading full-tilt for the 20-yard line.
While a reactive dunning model may have been adequate in the old economy,
current realities have rendered it high-risk if not totally obsolete. With more
customers falling into delinquency, greater effort and cost is expended to
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capture overdue payments when the AR department doesn’t take timely
preemptive action.
At six months into the pandemic, it become
increasingly relevant for collections to shift from a reactive
or preventive outlook towards a proactive strategy. You
need to proactively monitor signals of a customer’s
financial health and ability to pay you and act by working
with your customers to help both you and them continue
to stay in business in a time like this.
Collections Leader at a Fortune 500 software company
If an organization lacks advanced digital technology and an effective workforce
to follow up with overdue customers, they end up defaulting to the 80/20
pattern of expending 80% of their effort to collect on 20% of the highest value
accounts. With cash-in-hand being so important, this is obviously not the most
practical method to follow.
World-class organizations have proactive collections teams that are embracing
the advantages provided by Big Data, Machine Learning, and Artificial
Intelligence. Utilizing these resources allows them to receive real-time risk
signals from public financials, credit agencies, and customer payment patterns
and to take preventative action to stave off a delinquency event.
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Switching to a modern proactive dunning model means taking full advantage of
the power of digital technology. In the game of getting paid quickly and on time,
using such technology is like receiving valuable silent hand signals from the
head coach before your opponent makes a move. Instead of focusing on
customers who are already behind on payments, proactive collections is all
about having your collections team focus on customers who have a high
probability of becoming delinquent and thus can work on changing the
outcome.
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3.2. Peeking Into the Accounts Payable Playbook:
Buyer AP Teams Will Keep Pushing the Line of
Scrimmage on Payment Terms.
The global pandemic has taken a significant toll on business spend
negatively affecting 60% of global accounts payable by volume. In
response, payment terms for large accounts have been pushed from
30 days to 60 days and even 90 days.
The first response of the Accounts Payables team of any company in this
situation has been to stretch the payment cycle and maximize working capital.
Below is an example from the food and consumer goods industry showing that
DPO (Days Payable Outstanding) in Q1 2020 increased significantly from the
previous year.
Source: Eurofinance | Data as per SEC filings.
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3.3. Invoice Processing Automation: Get Ready to
Deal With More Customer Web Portals, Disputes &
Deductions, and Longer Payment Terms.
Your buyer’s AP department is looking to reduce the time spent on
emails, telephone calls, and in-person transactions with their
vendors/suppliers. As a result, there is an influx of automation
solutions entering the market that not only help buyers utilize their
time more effectively but also increase their cash position by
optimizing payment time.
What does this mean for you?
• Customers of all shapes and sizes will migrate toward AP Portals, which will
require you to upload payment information & invoices, fetch remittances, and
spend more time tracking payment status.
• AP teams have become meticulous about reviewing invoice line items - and
when in even small doubt quick to create a dispute to stall payments. As a
result, AR departments must brace for an increasing volume of disputes and
deductions.
• Buyers are tightening their cash management with AI-assisted payment
decision-making tools. These systems will study early payment discounts,
stretch Days Payable Outstanding (DPO) and make a sum-total optimization
of which invoices to pay on a particular day. Hence, you may need to re-
evaluate early payment discount strategies.
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3.4. Team Effort in the New Economy Means
Frictionless Collaboration Between You and Your
Customer.
In today’s digital world, the rules of customer
engagement are changing. To continue acquiring and
retaining customers, organizations need to recognize this
and adapt to these new dynamics.
Source: Deloitte, The Digital Transformation of Customer Service
Digital payments are no longer optional, part of the “new normal."
The move to digital payments is an obvious win-win, and the
pandemic has only accelerated adoption.
Converting physical payment collection methods to digital provides a three-fold
benefit: it’s an obvious gesture of goodwill shown for the safety of your
customers, in an increasingly “touchless” world, it provides a more convenient
method for customers to pay, and it allows organizations to collect payment
faster.
While paperless payments have been adopted the world over, the U.S. has held
on to paper check processing in many industries. According to Bain Research,
“The pandemic will speed up digital adoption by roughly three years.” This
means that organizations and industries holding on to antiquated methods will
now be forced to “get on board” to remain competitive.
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B2B Buyers Will Expect a B2C-Like Payment Experience.
Studies have shown that a poorly designed user interface can have a huge
negative impact on customer engagement. 38% of people will stop interacting
with a web site if the layout is unattractive. 88% will not return to a site after
having a poor experience. During this sensitive time when customers are
deciding which bills to prioritize, it’s incumbent upon organizations to embrace
Human Centered Design principles as they develop and upgrade their payment
portals.
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Unfortunately, a lot of AR teams have been investing in customer portals for
billing and invoicing which are clunky, lack critical features, or may only be useful
for a subset of customers. In the old economy, buyer preferences for making
payments differed across industries and buyer segments, and there was more
leeway to accommodate outliers.
In the new economy, regardless of sector, there is an overall push toward
embracing digital mobile payments that are fast, easy, and convenient. To gain a
competitive edge and increase working capital, a world-class organization
should focus on applying the best practices of digital transformation to this
critical customer relationship tool.
3.5. Collections is now a C-Suite Priority.
Globally, collections teams are going to remain a top priority for
CFOs. Through 2020, the collections department has proven to be
resilient in serving as the frontline for finance leadership’s mission to
safeguarding working capital. It is now time for collections leaders to
fully invest in building high-performance collections teams by
embracing digital transformation tools and trends that will be pivotal
in achieving and sustaining growth in 2021.
What does this mean for you?
• You will need to provide real-time visibility on the performance of
receivables. Real-time progress checks of each collector's performance
(number of customers, the total amount collected, customers reached) and
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the impact on business value metrics
(such as Percentage Current, Net
Recovery Rate, etc).
• You will need to share performance
reports at a high-frequency. C-suite
will need to know early in the game if
the needle is moving in the right
direction to make strategic decisions.
• You will need to build a high-performance culture in the team. Apply
predictive analytics processing. Drill down into metrics and keep making
improvements at micro (monitoring leading indicators and trending KPIs) as
well as macro levels (Business Value metrics and bottom-line impact) as a
future-proof strategy.
• You will need to gain greater visibility into customer performance. Utilize big
data to build a 360-degree view of all of your customers and a deeper
understanding of their performance metrics, financial health, and status.
Retrieve necessary customer data including invoice data, payment
commitments, and payment history on a single screen for each customer
with the capability to dig deeper and drill down into individual accounts for
further details such as credit information, disputes, notes, and call logs.
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CHAPTER 04
Building a More Resilient
Playbook.
Software is a primary tool in your Playbook. To
secure more working capital, organizations will
have to make certain to implement the right
software that’s able to meet key AR demands.
In this white paper, we took a macro overview of the new economy
and what’s driving the evolution of the Collections Management
process. We outlined red flag trends that world-class Collections
Management teams should have on their radar and what your
industry peers recommend. With our reconnaissance complete, it’s
now time to lay out the strategy for your 2021 Collections
Management Playbook.
We are in a unique situation where CFO’s and finance teams are looking for AR
software to preserve cash and safeguard working capital. At the same time,
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some are still skeptical about the actual impact a digital technology upgrade will
have on their business.
To guarantee ROI from the digital transformation of your collections
management process, you need to ensure that you can deliver on the following
demands:
4.1. Proactive Collections with Artificial Intelligence.
In collections management systems, AI is a prerequisite for
preemptive dunning. It can assist teams in multiple capacities such
as: identifying at-risk customers before they default, generating
prioritized worklists, and predicting the date on which a customer is
most likely to pay*.
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It can also identify the appropriate actions on customers at any given point in
time and then trigger them; actions such as automated dunning of customers by
sending out automated emails, scheduling notices of default by mail, and by
making automated phone calls for “touchless” collections.
*Collections payment date prediction: Collection rules and
prioritization are based on static customer segments that do not
change with time. Artificial Intelligence and Machine Learning
algorithms can help Collections Management become proactive by
predicting payment dates at a customer or account level based on past
payment behavior and current open invoices.
Having this type of data enables collectors to act before invoices and
customers go delinquent or past due. This in turn reduces the cost of
dunning activities, and allows a 10-15% improvement on DSO, while
also increasing available working capital. It additionally improves
collector efficiency by letting them focus on difficult customers rather
than low-risk ones.
In reactive dunning models, collectors can expend up to 30% of their work time
deciding which delinquent buyers to contact and how to contact them. In
reactive AR departments, collectors rely on their intuition, skill, and experience
to build worklists (prioritized lists of accounts to contact, how to contact them,
and when.)
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Instead of basing the analysis on the best available real-time data, collectors rely
on backward-looking static indicators such as Average Days Delinquent (ADD)
to prioritize customers to develop their collections strategies.
Collections teams traditionally look at static indicators, such as Average Days
Delinquent (ADD) to estimate payment date for a customer and, consequently,
to implement dynamic strategies for dunning, however, reliance on this metric
has failed to produce optimal results.
Average Days Delinquent (ADD) and Its Flaws
ADD is the average number of days that invoices are past due - the
amount of time between the invoice due date and the date it is paid.
The calculation helps a company evaluate the overall performance of
the collections department and its ability to convert accounts
receivable to cash, but because this metric is dependent on averages,
it’s affected by extreme values.
Often this metric cannot correctly take into consideration the AP cycle
schedule when used for assessment and results in grossly inaccurate
payment dates compared to actual payment dates.
For this reason, it’s not a sufficient indicator to predict payment date
and needs customer-specific factors such as AP cycle schedule to
predict the payment behavior of numerous unique customers
accurately.
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Static data and human intuition are
�Tip: If considering ADD grossly inefficient when matched
alongside DSO (or BPDSO), always against the tactics employed by
ensure that you are monitoring it digitally transformed AR
on an individual customer level. departments. Considering that a
single collector can be assigned
hundreds of thousands of accounts (depending on the size of a company), it’s
practically impossible to expect a high level of efficiency from the process
without the assistance of digital technology.
Automatically Generate a Prioritized List of Customers Every Day
Based on AI-Predicted Payment Dates and Improvise Your
Dunning Strategies With AI-Recommended Next Steps
In comparison, an AI/ML assisted system is able to proactively mimic human
problem-solving capabilities on a larger scale and at lightning speed based on
real-time dynamic data so that the collectors can maximize their productivity
and achieve cash collection goals effectively.
As an example, the HighRadius Rivana AI
Engine is capable of building a Random
Forest Regression Model (a Machine
Learning Model) by studying over 40+
invoice and customer level factors and can
predict invoice payment dates with an accuracy of greater than 90%.
The ability to provide insights, and recommend proactive collection strategies is
perhaps the most valuable attribute of an AI/ML platform. By analyzing
customer purchasing and payment patterns from disparate data sources, an AI-
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supported system can present predictive outcomes that allow preemptive
actions to be taken. Collectors can do away with tedious tasks that previously
consumed a great portion of their productivity and instead defer to the AI-
supported system for prioritized worklists. This helps start the recovery process
earlier and have it conclude faster - thereby reducing the overall collections
cycle time.
With the adoption of AI, businesses have access to more powerful customer
segmentation, faster resolution of low-value, low-risk accounts, and better
decision-making on high-value, at-risk accounts.
Collections AI Success Story: ShurTech Brands
ShurTech, the leading manufacturer of
scrim-backed pressure-sensitive tape
sold under the “Duck” brand, has
manufacturing and distribution in 12
countries. As can be imagined,
managing AR on such a scale is no small feat. ShurTech’s collections
management process was prime for a digital technology upgrade.
Challenges with their collections:
• Broken customer experience as a result of manual prioritization of
their worklist
• Lack of visibility in tracking, planning, and execution of customer
correspondence that was done manually via emails, fax, and
phone calls
• No centralized repository of notes - their SAP system allowed for
only item-level notes
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• Unreliable ad-hoc reminders from Outlook and spreadsheets
Using HighRadius Collections Cloud, ShurTech leveraged artificial intelligence to
devise a proactive collections strategy for their Accounts Receivable. As a result,
the team saw a 46% reduction in time taken to collect on all past-due accounts
and a 50% reduction in overall past-due AR. Read the full case study here.
4.2. Touchless Connectivity with Buyer AP Portals.
A growing number of AP departments are hosting their invoice and
payments processes through web-based portals - this means that
more AR teams will be required to work effectively with these
interfaces. There are two primary areas that AR must focus on when
working with AP payment portals:
1. Effectively posting invoices to payment portals. With the increasing
prevalence of AP payment portals, AR must be willing to explore ways to
push invoices directly into these platforms effectively. The faster that
invoices can be posted with all the required information, the higher
probability of invoices being processed in a timely manner.
2. Keeping the data related to customers, worklists, and payment status
updated and accurate. AR must also maintain the ability to track the
payment status of payments-due once invoices are sent and ensure that
invoices that aren’t getting paid do not fall through the cracks without finding
out why. Moreover, collectors must monitor which invoices are getting paid
to ensure that they don’t end up calling customers who have already paid!
31 www.highradius.com | info@highradius.com | ©2021 HighRadius. All Rights Reserved.| 2021 Ultimate Playbook for Collections Management
4.3. Integrated VoIP Calling to Increase Collector
Efficiency.
Integrated VoIP calling with an integrated dialer enables collectors to
contact any customer across the globe as well as to send emails, log
notes, and promises-to-pay (payment commitments) within a single
system.
We have noticed a huge demand in integrated VoIP
calling as teams switched to working remotely.
VoIP functionalities have proven to be invaluable for
collections teams and boosting CEI (Collection
Effectiveness Index). However, we strongly believe
that this need will continue even as some team
members start returning to work on-premises.
Two more noteworthy benefits of VoIP technology include:
• Having one less device to be managed. Plugin your headset and collectors
are good to go versus having to stick a phone between their ear and
shoulder, struggling to take notes.
• Second, call tracking and quality control for managers to audit. For a
manager, call tracking is a high-value analytic that allows senior staff to
determine how well remote collections teams are meeting key performance
indicators. These include monitoring the number of calls made, payments
committed (promise-to-pays created), follow-ups and payment reminders,
etc. - which affect the overall performance, such as Collector Productivity
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(CEI), Percentage Current, Days Sales Outstanding (DSO), Average Days
Delinquent (ADD) to build high-performing collections teams.
4.4. Collectors Will Start Playing an Active Role in
Dispute Management.
The global economic downturn, as well as the adoption of AI-
assisted software, has resulted in an increase in billing and invoicing
disputes from AP departments.
In your new playbook, collectors occupy a primary role in dispute management
as they are literally the first line of contact for your customers. In this position,
they are also likely to be the first to know that a customer is going to make a
short-payment.
Considering this, collectors now need to play two roles:
[We’re seeing] the emergence of new accounting
tools and technologies, a fundamental shift in the way
companies organize work, and, perhaps most critically, the
realization among at least some investors that customers
are the ultimate source of corporate value.
Source: Harvard Business Review, Are You Undervaluing Your Customers?
33 www.highradius.com | info@highradius.com | ©2021 HighRadius. All Rights Reserved.| 2021 Ultimate Playbook for Collections Management
• First, they can create a pre-deduction. Unique to HighRadius’ Collections
Cloud, pre-deductions are placeholders for an eventual deduction based on
the backup documents and information provided by the customer. All of the
aggregated documents (Claim copies, Proof of Deliveries (PODs), reason
codes, etc) can be easily attached to the pre-deduction as pdf files and sent
over to the deductions team for review. It enables AR analysts to get
information about deductions or disputes, even before payment is received.
This fast-tracks research & resolution and allows information to be shared
about the status of deductions or disputes raised by the customer.
• Second, they can potentially resolve any customer queries that might
eventually result in the customer not having to short-pay at all. Hence,
collectors and collection management systems need to have the ability to
relay information to and fro between the deductions and claims modules.
4.5. Custom Payment Plans, Easy Payment, and
Installment Options.
World-class organizations recognize the value of their existing
customers and will always explore ways to innovate and improve
operations and services so that they can keep them.
There has been a significant rise in the number of payment plans being created
since the onset of the global pandemic. Considering it can cost five times more
to acquire a new customer as opposed to keeping an existing buyer, it makes
sense to work with a customer to determine their willingness and ability to pay.
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There has been a significant rise
In a recent survey, 40% of in the number of payment plans
respondents said they would be being created since the onset of
more willing to complete a the global pandemic. If a
transaction if offered a payment customer is suffering due to the
plan. recent economic downturn,
offering a systematic payment
plan allows an impacted business to pay its dues on an installment basis to stay
within credit utilization thresholds and allow some breathing room for economic
recovery.
Still further, offering flexible payment terms can make you more attractive as a
supplier providing a major boost to your cash-on-hand. In a recent survey, 40%
of respondents said they would be more willing to complete a transaction if
offered a payment plan. Businesses that provide flexible payments have seen
revenues increase by as much as 50% (compared to an equivalent business in
the same industry offering payment plans).
If your organization embarks on offering flexible payments, an effective
collections management system is a requirement. Without it, collections teams
will not be able to adequately track custom payment plans for multiple
customers across their portfolio.
4.6. Enable Customers to Pay Where They Are.
One of the hallmarks of Digital Transformation is human-centered
design (HCD), a principle that positions human ease-of-use as the
primary focus of any digital development project to enhance
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adoption. Interfaces, apps, and platforms that follow best-in-class
practices will eliminate friction, simplify operations, and endeavor to
provide users with a positive experience.
Most invoicing and payment
initiatives have little to offer beyond
a payment portal, which means
many missed opportunities.
Move beyond a portal - Your
customers have divergent needs!
They want invoices not just on the
portal but also delivered through
email, EDI, print and mail, uploaded to AP portals like Ariba, Tungsten, or even
pushed to their accounting software like Quickbooks.
They also want flexibility with payment options - multi-currency support, FX,
local payment methods, as well as the option to pay on both web and mobile.
Are you able to provide your customers with an Amazon-like
payment experience?
All payment portals are not created equally, and all companies do not follow
best-practices for development. This means that payment experiences can vary
tremendously from company to company. Considering that an AP department
may need to log into multiple portals monthly to execute payments, poorly
designed portals may inject friction into the payment process that makes
capturing payment more difficult.
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One way to simplify payment processing is to include secure guest payment
links in dunning emails. This eliminates the extra step of having a customer
navigate to a payment portal and login to submit payments. Instead, they simply
click the secure link and leverage various digital payment options— pay via bank
account, credit, debit cards, other standard digital payments, mobile apps, or
even e-wallets—and proceed to pay. The payment is completed, all within 3
clicks, without even having to log in or remember another password!
The simplicity of paying via a dunning email link positions your billing process in
the customer’s mind as one of the easier payments to make and allows
collections teams to capture payments more quickly.
Payment via secure email links is included as a feature of HighRadius’
Collections platform and provides the following benefits:
• Secure payment gateway with PCI DSS Compliance
• Multiple payment formats supported, including Bank Account, ACH,
credit cards, and other e-payment options
• Customers can download payment receipts instantly
• Suppliers can view all payments made within the application in a
‘Payments History Tab’
• The remittance details are automatically sent to the cash application
team for straight-through cash posting
37 www.highradius.com | info@highradius.com | ©2021 HighRadius. All Rights Reserved.| 2021 Ultimate Playbook for Collections Management
4.7. Instant Replay: Track Team Performance in
Real-Time to Improve and Win the Long-Game.
High-performance Culture and Visibility: A high-performance culture
is a set of behaviors that leads an organization to achieve superior
results based on constant feedback and engagement within the
organization between team leaders, team members, and customers.
First, managers need a top-down view of their organization to understand
which areas, units, teams, or customer segments require improvement.Second,
they need a bottom-up view to understand how each collector on a team is
doing by looking at their leading indicators and not just the collectors lagging
indicators.
A high-performance culture primarily depends on the alignment of
organizational strategies and priorities. Some of the common high-performing
culture traits of a world-class AR team include:
Real-time visibility into collections activities and metrics:
“Is my quarterback really making the right tackles? Is my defense strong
enough?”
Real-time daily progress checks of each collector's performance (no. of
customers, the total amount collected, customers reached), meeting daily
performance goals are an indicator of meeting business value metrics (such as
Percentage Current, Net Recovery Rate, etc.)
Goal Setting to stay on top of collections:
“Keeping the odds in my favor by creating the right game plan”
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Defining specific targets (collection
effectiveness, to credit risk to blocked order
SLAs) and real-time monitoring of how teams
and individuals are performing in comparison to
plan.
Continuous Performance
Benchmarking:
“Setting the real records for players to break to
win big in the long-term game.”
Benchmarking KPIs with the industry gold standard as well as benchmarking
with individual collectors to identify which collectors are performing better than
others, deduce their best practices, and help implement them for the entire team
to beat targets.
The primary focus of an ideal collections management platform should be
building a long-term stable business by delivering innovation and ensuring that
all the involved stakeholders achieve high performance.
Such an environment ensures that AR transformation succeeds at all levels and
delivers true business value. For AR, an ideal solution should measure metrics
such as:
• It starts with tech-adoption and product usage metrics: Track how well
your users engage with the new technology to leverage the available
features and functionality to its fullest potential, fast-track their work, and
make better decisions.
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• Good technology drives better analyst performance: Provides transparent,
real-time reflection using performance metrics from their effectiveness in
capturing payment commitments to their ability to recover invalid deductions.
• Better analyst performance results in improved customer performance:
Provides a deep-level look at the performance of any single customer, or
customer segments, enables taking strategic action or course corrections.
• Business value and KPIs: Real-time visibility into Business Value Metrics
and trending KPI information to help managers assess how teams and
technology are creating bottom-line business impact by reducing DSO,
increasing available working capital, and reducing borrowing costs.
40 www.highradius.com | info@highradius.com | ©2021 HighRadius. All Rights Reserved.| 2021 Ultimate Playbook for Collections Management
CHAPTER 05
Three-Point Field Goal, Make
HighRadius Part of Your Team!
If 2020 was a blitz by the opposing forces of COVID-19 and digital
transformation, this playbook is designed to give you the “secret sauce” for
dominating in 2021 and beyond. The recommended strategies laid out in this
paper will help your organization build a strong
offensive line and a clearly defined comeback route
to winning in the second half.
We’ve discussed the requirements and
benefits of implementing a high-
performance collections management
system. HighRadius provides just such a
platform to hundreds of successful
collections teams around the world.
Kickoff your AR department’s digital
transformation with a guided free
demo of the AI-powered HighRadius
Collections Cloud today.
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