To stay ahead of the competition, you need enough cash flow to invest in key areas like hiring top talent, research and development, and adopting new technologies. However, with an efficient accounts receivable (AR) collections process, this can be easier.
This is where AR automation software can help. It streamlines your collections process by removing manual tasks, improving customer communication, and helping you predict payment behaviors.
In this article, we’ll explain what AR collections software is, explore its benefits, and share tips on what to look for when choosing one.
What is AR Collections Software?
AR collections software helps businesses manage their accounts receivable process by focusing on collecting overdue payments. It keeps track of outstanding invoices, calculates amounts due, and sends reminders to customers to ensure timely payments.
The software monitors payments received and offers data and analytics to understand collection trends and customer payment behavior. This information helps businesses make better decisions about offering credit to new customers.
In other words, AR collections software streamlines the payment collection process, reduces manual work, and improves cash flow management.
Why the Collections Team Needs a Collections Software?
A collections team plays a crucial role in managing a company’s cash flow by ensuring customers pay their invoices on time. However, the team can face many challenges without the right tools, such as missed payments, delays, and disputes. This is where collections software becomes essential. Here’s why:
1. Streamlined Process to Reduce Manual Repetitive Tasks
AR collections software automates repetitive tasks like sending payment reminders, tracking overdue invoices, and recording payments. This reduces the burden of manual work, allowing the collections team to focus on more strategic activities, such as negotiating with customers and resolving disputes.
2. Improved Communication for Better Customer Relations
Effective communication is key to maintaining good customer relationships. Collections software provides a centralized platform for all customer interactions, ensuring communication is clear, consistent, and timely. This transparency helps in maintaining positive customer relations even when dealing with overdue payments.
3. Better Analytics for Data-Driven Decisions
Data-driven decisions are vital for any finance team. AR collections software offers robust analytics and reporting features that provide insights into payment patterns, customer behavior, and collection efficiency. These insights help the team make informed decisions and fine-tune their collection strategies for better outcomes.
4. Reduced Bad Debt and Write-Offs
Sometimes, writing off a bad debt is unavoidable when it becomes clear that the payment can’t be collected. However, with automated reminders and escalations, collections software ensures that overdue payments are followed up timely, reducing the likelihood of bad debt and write-offs. The software also helps prioritize high-risk accounts, enabling the team to focus on accounts that need immediate attention.
5. Improved AR Metrics for Accelerated Cash Flow
By automating and optimizing the collections process, companies can achieve faster payment cycles and reduce days sales outstanding (DSO) and average days delinquent (ADD). This accelerates cash flow, ensuring that the company has the necessary liquidity to operate smoothly.
What to Look for in Automated AR Collections Software?
When choosing automated AR collections software, it’s important to focus on key features that will make your accounts receivable process smoother and more efficient. Here’s what to consider:
1. Provides Easy Integration
The software should integrate smoothly with your existing accounting and ERP systems like QuickBooks, NetSuite, or SAP. Seamless integration ensures data flows accurately between systems, reduces manual data entry, and minimizes errors.
2. Enables Smart Customer Segmentation
AR collections software should have an easy-to-use segmentation feature. It should provide aging reports that highlight overdue amounts and which customers owe the most. This helps you prioritize the most urgent and risky invoices, making collections more efficient.
The software should let you group customers by their payment habits. For instance, you can reward those who always pay on time and adjust terms for those who often pay late.
3. Offers Multi-Channel Payments Reminder Automation
Not all customers check their emails often. AR collections software should allow you to send automated payment reminders via SMS, WhatsApp, LINE, and Zalo. It should also automatically create tasks for the collections team, making sure reminders are sent on time and through the customer’s preferred method. The software should trigger actions based on events like due dates, P2P dates, or set intervals, helping you follow up effectively and get paid on time.
4. Allows Creating Customizable Reminders
The software should let you set up customized reminders for each customer. You can choose the best communication channel and message based on the customer’s payment habits. Use placeholders to automatically add details and personalize messages. The software should allow you to add cc or Bcc and attachments for SoA or invoice PDF.
5. Enables In-App VoIP Calling
Look for AR collections software that includes VoIP calling. This feature allows your accounts receivable and sales teams to make calls directly from the software. With built-in scripts for follow-up calls, your team can use these pre-made templates or customize them as needed.
6. Offers Customer Self-Service Portal
A self-service portal allows customers to view invoices, make payments, and access their payment history at any time. This convenience can lead to faster payments, fewer disputes, and less administrative burden on the collections team.
7. Provides Consolidated Communications History
The software should keep a complete record of all communications with your customers, such as emails, phone calls, and messages. Having all this information in one place makes it easier to follow up and resolve issues quickly. It also ensures that your team is always up-to-date on the latest communications, reducing confusion and improving overall efficiency.
8. Streamlines Team Collaboration with Finance CRM
Simplify team collaboration by using an AR collections software that allows you to assign custom roles and permissions, based on each team member’s responsibilities. Offers a centralized dashboard to manage tasks and ensure timely responses to customer queries. So teams can plan the next steps, take notes, and manage phone calls efficiently.
9. Keeps Track of Team Performance
Stay on top of your receivables effortlessly with weekly reports sent straight to your email, giving you a snapshot of your collections’ health. The software sends daily reminders to team members to ensure tasks are followed up on time, and weekly briefings provide an overview of pending actions from sales and finance teams.
Collection managers can track each collection team’s KPIs to see detailed reports on collections and overdue amounts. Monitor the status of actions and identify any skipped tasks for better visibility and management.
10. Offers AI-Powered Analytics and Reporting
AI-powered analytics and reporting features allow you to track payment patterns, identify overdue accounts, and forecast cash flow. Detailed reports help you understand the effectiveness of your collections strategy and make data-driven decisions to improve it.
What are the Best Practices for Choosing a New AR Collections Software?
Implementing new AR collections software can be challenging, affecting both your customers and financial health. By following a structured buying and implementation process, you can minimize stress and maximize ROI. Here are some best practices:
1. Build a Strong Business Case
Start by forming a team with key stakeholders, including someone from IT and an AR specialist. Determine your current AR metrics and compare them to industry benchmarks to identify areas of improvement. This data will help you build a solid business case for the new software.
2. Research Potential Vendors
Create a list of potential vendors by consulting industry experts, peers, and online groups. Look for vendors whose offerings align with your business needs and values.
3. Narrow Down and Schedule Demos
Shortlist three vendors and schedule demos. Prepare to discuss your current systems, AR processes, and what you expect from the new solution. Focus on key features like automated workflows, easy integration, and real-time insights.
4. Consider Customer Impact
Ensure the new system offers a seamless experience for customers, such as flexible payment options and a self-service portal. Develop a communication plan to guide customers through the transition.
5. Perform Due Diligence
Don’t just compare prices—consider the overall value, including ROI, customer satisfaction, and employee efficiency. Evaluate the vendor’s support model and cultural fit, as they will be your long-term partner.
6. Finalize the Contract
Once you’ve assessed all options and projected outcomes, and considered the impact on your team and customers, you’re ready to sign the contract and move toward improved cash flow and ROI.
A Way Forward
Managing AR collections effectively is crucial for maintaining a healthy cash flow and supporting your company’s growth. Peakflo’s Invoice to Cash solution stands out by offering a streamlined, automated approach to debt collection.
With features like automated reminders, easy dispute resolution, and insightful analytics, it simplifies the collections process, helping your team stay organized and focused. By integrating Peakflo’s solution, you can improve collection rates, reduce overdue invoices, and ultimately boost your bottom line.
