Collections management within a company is often seen as a delicate activity, as it involves both financial and commercial issues.
On one hand, the company needs 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 customers. Therefore, it is necessary to implement a policy and a procedure for collections that are effective and respectful of the commercial relationship.
To achieve this, adopting an effective collections tool is particularly useful. Indeed, this type of solution accelerates invoice payment, thereby reducing DSO and thus improving cash flow. The question remains: which solution is best suited to your needs? Between collections software, ERP, and a simple Excel spreadsheet, which one should you choose? We can help you make your choice with our comprehensive comparison.
Collections software: the dedicated and automated solution
Collection software is undoubtedly the most comprehensive and advanced solution to collect your receivables as quickly as possible.
Indeed, collections software is a solution designed entirely to optimize the collections process within your company. To this end, collections software comes with many particularly valuable features, such as:
- Alerts for unpaid invoices to prevent oversights,
- Automated dunnings 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 prevent 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 collections software is that it can integrate with ERP and other accounting tools already used 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 collections software is used by both the accounting and finance teams and the sales teams. This collaboration between teams ensures efficient and personalized follow-up of cases by facilitating contact with the customer. Moreover, it allows payment terms applied specifically to the customer to be adjusted, reducing them when the customer has multiple unpaid invoices.
Consequently, using collections software saves employees a significant amount of time. It is also a highly effective tool for taking swift action and reducing payment delays following an unpaid invoice, thanks to the collections automation. Collections software also provides greater visibility of incoming cash flows.
In short, collections 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 collections
ERP software is, by definition, enterprise resource planning software. It is therefore a comprehensive solution that aims to centralize all 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 collections remain limited. For example, you do not receive notifications to alert you that an overdue invoice remains unpaid, and you cannot customize or automate your dunnings. Similarly, you do not have access to a comprehensive dashboard that is updated in real time.
This is why using ERP software for collections 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 using this type of software. However, it will not be sufficient to implement an advanced collections procedure, as is possible with collections software.
Excel: the manual solution for small companies
Another alternative solution for managing customer collections is to create an Excel spreadsheet. This solution is often used by small companies to track dunnings 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 collections also has many limitations. First, this solution can be unreliable. Everything is done manually, which can be a significant source of errors. 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 spend their time on customer follow-ups and working on more complex cases. In addition, Excel does not allow for easy sharing of information between finance and sales teams. Several people cannot work on the same spreadsheet at the same time.
Excel can therefore be a collections solution for small companies with few invoices and payments to manage. Nonetheless, as soon as the volume of information to be processed increases, it becomes essential to use an automated solution, such as collections software.
Collections software, ERP, or Excel: how to make the right choice?
To choose the most suitable collections solution within your company between an ERP, Excel, and collections software, several criteria must be considered. 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 invoices and the average payment period (DSO).
| Solution | Benefits | Limits |
| Collections software | Automated dunnings, real-time tracking, team collaboration, ERP integration | License cost, initial integration time |
| ERP | Centralization of data, overall consistency of the system | Few collections features, limited customization |
| Excel | Free, flexible, easy to set up | Risk of errors, no automation, limited collaboration |
As seen previously, automating collections is a real lever in terms of collections performance. This is especially true when a company must manage a large amount of information and carry out numerous follow-up actions. It saves time and reduces the risk of errors.
In addition, with collections software, you benefit from real visibility on upcoming, received, 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, collections software is often the best choice for companies wishing to professionalize their processes and speed up their cash receipts.
If you are considering adopting a collections software solution, you must first take into account the features provided 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 collections software, ERP, and Excel, 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 companies that manage a low volume of invoices. However, collections software is particularly useful for companies that want to effectively manage their collections and have better control over their cash flow.
