Collecting your receivables manually has many limitations. Not only does it make the collection process particularly time-consuming, but it also lengthens processing times. And these are just a few examples of the disadvantages of manual debt collection.
This is of the utmost importance, since collection management has a direct impact on the company’s expected cash flow. This is where automated collection, using collection software, proves to be the solution for an optimized collection process. Here’s how it works.
What are the challenges of manual debt collection?
Manual debt collection presents the company and its employees with many challenges.
First of all, manual collection of overdue receivables has a negative impact on team productivity and reduces the effectiveness of actions taken. Indeed, having to process each collection file manually requires significant human resources. Employees have to perform numerous micro-tasks to gather information, carry out the right collection actions at the right time, and keep track of files. This takes up an enormous amount of time.
On the other hand, this manual collection process is the source of errors in invoice follow-up and reminders. For example, an employee may follow up on a customer who has already paid up. This can damage the business relationship, as the customer feels offended. Another example is when the statute of limitations is exceeded, leading to the amount of an invoice that has become irrecoverable being written off.
What’s more, it’s difficult for collection teams to prioritize collection actions.
But manual debt collection also has major limitations for company management. Managers, CFOs and accountants lack visibility over the status of receivables. They don’t have access to data updated in real time, nor do they have a summary dashboard showing key indicators such as DSO. As a result, strategic decision-making becomes more complex.
Finally, the manual handling of the collection process makes it difficult to coordinate actions with other departments. It’s important to remember that managing unpaid bills is not just a matter for accountants and debt collectors. It’s a subject that also concerns the sales department.
What impact do late payments have on cash flow?
Over and above the organizational consequences of manual management of the debt collection process, there are also significant consequences for a company’s cash flow.
For a company, unpaid invoices mean a delay in expected incoming flows. This can lead to significant cash shortfalls, reducing the liquidity available for current operations and investments. If the situation persists, a payment default leading to suspension of payments may even be feared.
In addition, a less healthy cash position increases dependence on external financing. The company is forced to resort to short-term, often costly, financing (increased authorized overdraft, factoring, etc.).
And these cash flow pressures can also lead to a deterioration in relations with suppliers and partners, if the company delays payment for lack of cash flow, for example.
What are the benefits of automated debt collection?
Automated debt collection offers many advantages.
First and foremost, adopting a tool to automate debt collection enables you to centralize data efficiently. Everything is in one place, reliably entered and linked to your billing software. It also ensures that data is updated in real time, to avoid inappropriate reminders and facilitate informed decision-making.
Automated debt collection also makes it possible to increase the traceability of collection actions. You can consult the history of actions and easily identify the next step. Time savings and efficiency guaranteed. Processing times are reduced to increase your chances of obtaining payment quickly.
Automated debt collection also makes it possible to predict collections more effectively. For example, AI has the ability to analyze payer behavior and predict collections with greater accuracy. It is therefore an effective solution for preventing delays and dealing with them more efficiently.
In concrete terms, this means setting up collection software tailored to your needs.
Would you like to take the step towards automation? DIMO Software is the publisher of the CashOnTime debt collection automation solution, which frees your teams from time-consuming tasks. Discover the features that will enable you to take your debt collection to the next level!
Conclusion
Manual collection processes are not optimal. They lack reliability, make collection actions time-consuming and can cause cash flow tensions. On the contrary, by switching to an automated process for the collection of your receivables, you benefit from a reliable tool, updated in real time, which gives you a clear and precise view of unpaid invoices, and of actions in progress. It’s the ideal solution for optimizing your cash flow and improving customer relations.
