Debt collection management within a company is often seen as a delicate activity, as it involves both financial and commercial issues.
On the one hand, it is essential for the company to ensure that incoming cash flows arrive on time to avoid cash flow gaps that could harm its financial health and make it difficult to pay its own supplier invoices. On the other hand, it seeks to preserve its relationship with its customer. It is therefore necessary to implement a policy and procedure for debt collection that is effective and respectful of the commercial relationship.
To achieve this, adopting an effective collection tool is very useful. This type of solution speeds up invoice payment, thereby reducing DSO and improving cash flow. The question remains: which solution is best suited to your needs? Between collection software, ERP, and a simple Excel spreadsheet, which should you choose? We can help you make your choice with our comprehensive comparison.
Debt collection software: the dedicated, automated solution
Debt collection software is undoubtedly the most comprehensive and advanced solution for obtaining payment of your customer receivables as quickly as possible.
Indeed, debt collection software is a solution designed entirely to optimize the debt collection process within your company. To this end, debt collection software is equipped with many particularly interesting features, such as:
- Alerts for unpaid invoices to avoid oversights;
- Automated reminders triggered by predefined scenarios based on customer profile, amount owed, and length of delay;
- Payment tracking, including when setting up payment schedules;
- Real-time updates of information to avoid errors and duplicates;
- Dashboards that provide an accurate picture of the situation, enabling appropriate decisions to be made for the management of the company’s cash flow;
- Management of customer disputes, which may be a reason for non-payment;
- Etc.
Another advantage of collection software is that it can integrate with ERP and other accounting tools already in place within the company. Compatibility between tools and their connection facilitates data exchange and allows information to be updated in real time on both sides.
In addition, the collection software is used by both the accounting and finance teams and the sales teams. This collaboration between teams ensures effective and personalized follow-up of cases by facilitating contact with the customer. It also allows payment terms applied specifically to the customer to be adjusted, reducing them when the customer has multiple unpaid invoices.
Consequently, using debt collection software saves employees a significant amount of time. It is also a very effective tool for taking swift action and reducing payment delays following an unpaid invoice, thanks to the automation of the collection process. Debt collection software also provides greater visibility of incoming cash flows.
In short, debt collection software is a solution that has a positive impact on a company’s cash flow and customer relations.
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ERP: a comprehensive but generalist solution for debt collection
ERP software is, by definition, enterprise resource planning software. It is therefore a comprehensive solution that aims to centralize all of a company’s management processes. This ranges from accounting and human resources to logistics.
As a result, some ERP software includes modules for managing invoices and tracking payments. However, the features for debt collection remain limited. For example, you do not receive notifications to alert you that an invoice is overdue, and you cannot customize or automate your reminders. Similarly, you do not have access to a comprehensive dashboard that is updated in real time.
This is why using ERP software for debt collection can be a viable solution for companies seeking an integrated approach to management. For example, it is a solution that may be relevant for companies already equipped with this type of software. However, it will not be sufficient to implement an advanced collection procedure, as is possible with collection software.
Excel: the manual solution for small businesses
Another possible solution for managing customer debt collection is to create an Excel spreadsheet. This solution is often used by small businesses to track reminders and payments. This is probably because Excel is a common software program that teams are already familiar with and that allows them to create a customized tracking table based on the company’s needs. The spreadsheet format also offers great flexibility.
However, using Excel to manage debt collection also has many limitations. First of all, this solution can be unreliable. Everything is done manually, which can be a significant source of error. There is also a risk of data loss in the event of mishandling or problems with the company’s computer servers.
Furthermore, due to the lack of automation, tasks are often repetitive for employees, when they could be spending their time following up with customers and working on more complex cases. In addition, Excel does not allow for easy sharing of information between finance and sales teams. It is not possible for several people to work on the same spreadsheet at the same time.
Excel can therefore be a debt collection solution for small businesses that have invoices and payments to track. However, as soon as the volume of information to be processed increases, it becomes essential to use an automated solution, such as debt collection software.
Debt collection software, ERP, or Excel: how to make the right choice
To choose the most suitable solution for debt collection within your company between an ERP, Excel, and collection software, several criteria must be taken into account. For example, you must consider the size of the company, its maturity, the volume of invoices and payments to be tracked, as well as the rate of unpaid bills and the average payment period (DSO).
| Solution | Benefits | Limits |
| Debt collection software | Automated reminders, real-time tracking, team collaboration, ERP integration | License cost, initial integration time |
| ERP | Centralization of data, overall consistency of the system | Few recovery features, limited customization |
| Excel | Free, flexible, easy to set up | Risk of errors, no automation, limited collaboration |
As we have seen previously, automating debt collection is a real lever in terms of collection performance. This is especially true when a company has to manage a large amount of information and carry out numerous follow-up actions. It saves time and reduces the risk of error.
In addition, with collection software, you benefit from real visibility on upcoming, collected, or overdue payments. You have access to dashboards that facilitate the financial management of the company, and both financial and sales teams can access them.
Therefore, debt collection software is often the best choice for companies wishing to professionalize their processes and speed up their cash flow.
If you are considering adopting a debt collection software solution, you must first take into account the features available to you and then ensure that the solution is compatible with your other software and can be scaled to meet your needs.
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Conclusion
To make the right choice between collection software, ERP, and collection software, it is important to assess the company’s current and future needs, as well as its level of maturity. Excel or an ERP system may be sufficient for small businesses that manage a low volume of invoices. On the other hand, collection software is particularly useful for companies that want to effectively manage their debt collection and have better control over their cash flow.
