Managing debt collection among professionals is a key concern for companies. This represents the final step in the sales process. Therefore, it has a strong impact on profitability, cash flow, and customer satisfaction.
Its effectiveness is often indicative of the quality of the company's organization and its internal processes. It is a crucial component of the customer relationship and should be at the heart of corporate strategies.
Cash collection is frequently perceived as a procedure involving litigation or threatening letters from bailiffs or collection agencies. However, the pre-litigation (sending formal notices) and litigation (lawsuits) phases represent a minuscule fraction of the vast sums involved in inter-company credit, amounting to thousands of billions of euros. In fact, 99.99% of collection collections are conducted amicably within the context of the commercial relationship.
This process is above all a tool for overseeing the organization, its operational cycle, and its working capital requirements. When its potential is well thoroughly assessed, it has a positive influence on every stage of the sales process:
- Customer risk management and anticipation
- Engaging in contracts
- Billing management
- Management of disputes of all types: insufficient quality, delivery issues, invoicing discrepancies, after-sales support, and more.
Dunning actions have more impact when they are done early in the process. In other words, prior to the invoice's due date. It enables a more rapid identification of the underlying causes of non-payment. This will facilitate the implementation of essential adjustments within the company's structure to prevent the reccurence of similar mistakes.
Cash collection is therefore a tool to enhance the overall effectiveness and efficiency of a business. This approach is also a way to give credibility to your company with its customers. You will then be able to guarantee its sustainability by confirming that collection occurs on the designated dates.
From the need to frame the amicable collection stage...
It is crucial to frame the amicable phase. It should have both a starting point and a conclusion. Its timeframe must not exceed 40 to 60 days, depending upon the recovery scenarios in place.
Another critical aspect is the progressive nature of the actions, which may not consistently serve the same objective. It is contingent upon whether the actions are executed at the outset or conclusion of the process.
If this phase lacks adequate oversight, the creditor risks being misled indefinitely by his debtor. The latter will consistently present a good reason to delay payment.
...to the establishment of recovery scenarios
The setting of the amicable phase is established through the implementation of recovery scenarios that outline incremental and critical actions. There are several levels of reroll, and a particular action allows you to move from one level to another. Transitioning from an interactive email to a phone call takes the scenario up a level.
Each scenario is tailored according to the specificities of the customer segment to which it applies. Consequently, there will be significant distinctions for clients identified as being financially risky, for public customers, or for customers from Saudi Arabia...
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Collection scenarios in My DSO Manager
It is possible to create an unlimited number of dunning scenarios in My DSO Manager ! You can tailor them to suit the specific needs of different customers and their respective receivables.
Each scenario contains actions that can be adjusted in the Admin settings. They are subsequently modified during their implementation (for example, the sending of an interactive e-mail).
The objective is to leverage the power of the tool to dynamically generate follow-up actions. These must include all the necessary information (amount due, statement of account, pdf of invoices, etc.). And of course, while allowing the collection manager to automate and customize them, as this directly conditions their effectiveness. See more in the online demo.
The collection manager still retains their autonomy. They will take action to adjust the reminders based on their understanding of the circumstances and their experience with the client. However, it must respect the established process.
It will now be inconceivable to have a healthy (non-contentious) claim that is 180 days old. All the more so with a stagnating situation in the collection of the bill.
Failing to implement this kind of process will result in significantly increased time spent on reprocessing each invoice. The actions will be distributed over an extended timeframe, resulting in an increasingly prolonged payment period. Consequently, you will not be able to get paid properly. This situation will lead to cash flow tensions and the potential risk of losing your customers in the long term.
Conclusion
Setting up follow-up scenarios is essential to effectively managing the amicable phase. It represents the majority of your debt collection efforts.
Each scenario presents two possible outcomes for an invoice:
- The first, temporary, is the identification of a justified dispute (billing error, delivery problem, etc.). In this case, the collection manager maintains ongoing communication regarding the invoice with an internal player in the company (sales team, technical team, etc.) to ensure its resolution as quickly as possible. As soon as this is the case, the invoice reintegrates the reminder scenario in place for the customer.
- The second is simply the payment of the invoice or the classification of the amount as a doubtful debt should the invoice remain unpaid and lead to legal proceedings.
These principles are applied to strengthen the effectiveness of the recovery and the commercial relationship with your customers. They make it possible to set a high standard for all internal processes (quality, logistics, administration). The goal is for each invoice to be certain (indisputable by the customer) and paid on time.
The use of a collection software is essential because it allows you to increase efficiency tenfold thanks to the automation and digitization of reminders. Such a tool also allows the application of dunning scenarios in a much more precise and refined way, based on a multitude of criteria intelligently generating the most relevant actions.