Is Your Debt Management & Collection System Leaving Money on the Table?

Here on the Gotransverse blog, we often find ourselves focusing on the early parts of the order-to-cash process, from usage and rating to mediation to invoicing. But what about the end of the process? The part without which there would be no revenue? We’re talking about actually collecting payments.

The process of collecting payments is, in reality, two processes often discussed together: collections and dunning. Collections is the process of trying different ways to collect payments when the default one doesn’t work, while dunning is the process of reminding customers to make payments, either proactively or retroactively. Both processes tend to get a bad rap — it’s no fun chasing down money — but the right debt management system makes them easy.

Let’s take a look at the two processes, including why they’re important, what they look like, how to optimize them, and what it takes to automate them.

Your Collection System Is Your First Line of Defense Against Revenue Leakage

Why are collections and dunning so important? Because they ensure money isn’t left on the table. The Boston Revenue Group recently discovered that 45 percent of companies see revenue leakage as a chronic problem, and 73 percent don’t have the automated processes to address it. So what does that mean? Well, some reports show that organizations lose anywhere from 1% to 5% of EBITA from flawed or inaccurate business processes that cause revenue leakage. It doesn’t seem like much, but if your company generates $100 million in annual revenue, you are losing $5 million to revenue leakage.

Collections and dunning aren’t the only way to stem the flow of revenue leakage, but they’re certainly the biggest stopper in the dam. That’s why sophisticated collections and dunning tools are such an integral part of a successful debt management system — to stop revenue leakage and ensure payments are collected successfully, fully, and efficiently.

Collections & Dunning Aren’t Always About Overdue Payments…

A business doesn’t have to wait for payments to be overdue before kicking into collections and dunning protocols — and in fact, it’s better for everyone if they don’t.

Here are a few examples of proactive collections and dunning strategies:

• Personalized renewal notices for subscribers (better yet, automated renewals)
• Reminders, sent long before the invoice is due, to update credit card information
• Payment plans that can be customized around each customer account’s needs

When you have the right protocols in place to keep customers apprised of upcoming due dates and make payment as straightforward as possible, you can do a lot to minimize late payments—and the strain on customer relationships that they inevitably come with.

…But They Can Be

Of course, despite everyone’s best efforts and intentions, late payments happen. That’s when retroactive dunning and collections strategies are critical to get those invoices paid as quickly and easily as possible, with minimal friction between business and customer. Here are a few strategies to have in place for when invoices exceed their due dates:

• Payment Retries: Sometimes payments fall through even when customers are on top of things. Automated payment retry schedules enable additional collection attempts on submitted (but failed) payments without further hassling customers.
• Dunning Reminders: Regular nudges — both gentle and not-so-gentle — can encourage customers to make good on late payments. It’s important that these be customized based on the client, however, because a type of reminder that works well for one kind of customer may be a disincentive for another.
• Dunning Actions: When the nudges don’t work, late fees and even suspension of service may be the next step in getting delinquent customers’ attention.
• Internal Payment Notifications: Of course, businesses have to be sure a payment is actually outstanding before reminding customers about it! Nobody likes to receive overdue notices for bills they’ve already paid. It's essential that, when any invoices are paid, the finance department is automatically notified so the customers’ status can be updated accordingly.
• Payment Plans: When customers get behind on their payments, businesses have to decide between collecting their overdue revenue and maintaining — or repairing — relationships. A payment plan — again, tailored to each customers’ needs — is a good middle ground.

These efforts can start with gentle payment reminders and escalate as needed until payment is received. The most important part, however, is that as much as possible, the nudges and actions are all customized to each client. For a longtime customer who’s never been late on a payment before, service suspension is a bit of a nuclear option; but for the customer who’s late every single pay period, it may make more sense. And when customers’ financial situations are in flux (not uncommon in this economy), being open to flexible payment plans may enable businesses to hold onto customers that would otherwise have to leave.

Make Collections Easy with Gotransverse’s Debt Management System

If you’re thinking all this customization of collections and dunning strategies sounds impossible to manage, you’re not wrong — unless you have the right debt management system in place. Gotransverse’s sophisticated suite of collections and dunning tools are highly configurable, designed to automate collections and dunning workflows in a variety of ways that ensure businesses can communicate about late payments in the most effective way for every customer in the most effective way.

You can explore our full suite of tools here, but these are a few of the highlights:

• Our highly customizable dunning plans are designed to reduce the average number of days it takes to collect payment after every sale. The plans allow users to configure specific steps and create and send notifications, all automated based on the number of days an invoice is past due. And they can be tailored based on each customer’s needs and behaviors, whether they’re premier customers, high risk customers, or any other classification. That way, you can communicate with each customer in the manner that’s most likely to result in paid bills.
• Gotransverse’s payment plans allow businesses to create schedules that meet customers’ individual financial needs in order to ensure outstanding balances are paid. New payment plans can be created based on overdue invoices, and they give customers the opportunity to set up automated payments via credit card or bank draft, or to make payments manually at their convenience. (These payment plans work in tandem with dunning notifications to ensure customers aren’t receiving overdue notices while they’re working to pay off their debt.) Like the dunning plans, these are configurable to provide the right type of experience for each account, enhancing the customer experience while minimizing revenue leakage.
• Our automated payment retries ensure each payment failure is noticed and rectified quickly, no matter the cause. While these failures are often not the fault of the client, they will still lead to lost revenue if they’re not caught. So, users can customize retry schedules for different accounts, configuring variables like how many retries to attempt, how many days to wait between retries, and which payment processor failure codes should be considered for automated retries.

Does your business need to streamline collections to improve cash flow? A debt management and collection system like Gotransverse makes the process a breeze, enabling our clients to alleviate the stress from collections while stopping revenue leakage in its tracks. You can learn more about Gotransverse’s automated collections and dunning tools in our data sheet, and discover more about our platform by taking a virtual tour today. Then, when you’re ready, request a demo, and one of our experts will gladly walk you through our platform and processes.