If you’re like most businesses, you spend thousands of dollars a year on software like CRM or ERP to help you bring in more leads and close more deals, but what about the rest of the process? The work doesn’t stop after a contract is signed or a product delivered, you have to close the loop by collecting the money owed to you. This is a job that most companies know to be easier said than done; but dont worry, there is software for this too! Here are 6 of the collection management software benefits realized by many companies.
You might be thinking to yourself, “why do I need credit collection software when I have an A/R module in my ERP system?” Because, according to industry analyst firm Paystream Advisors, “ERP solutions have been woefully inadequate in terms of credit and collections functionality” and it’s true. You may have a module in your system today, but do collectors still need to print aging reports and manage data in spreadsheets? Probably. When this is the case, collectors are spending most of their time on administrative and clerical duties, not strategic collection activities.
In short, companies implement accounts receivable collection software to replace those manual processes, centralize their information, and automate time consuming tasks so they can focus on what matters most, collecting what ther are owed!
GET PAID FASTER
According to Paystream Advisors, companies using collection management software get paid about 20% faster than companies who use manual or disconnected systems. Considering that on average, companies extend 28 day terms, but they don’t get paid for 61 days…if such a company could improve that by 20% they would be getting paid 12 days faster!
IMPROVE CASH FORECASTING
Collection management software typically allows your collection team to track expected payments in addition to providing a statistical cash forecast. You can use expected payments to confirm your statistical cash forecast for more accurate cash flow management.
REDUCE FINANCING COSTS
As mentioned above, companies using collection management software typically get paid 20% faster. What does that mean to your bottom line? For every $10 million dollars in revenue you’re incurring about $10,000 in finance charges (at 6% interest rates). Getting paid 20% faster eliminates about $20,000 in finance costs every year. Companies that rely on factoring to resolve cash flow issues can also save a considerable amount of money by reducing their dependency on high interest accounts receivable financing options.
MAXIMIZE UNUSED CREDIT LINES
Accounts receivable collection management software should provide a holistic view of the entire accounts receivable process so you can understand how improved credit management can impact future sales. With collection software you can identify unused credit lines and work with lower risk customers to help them buy more products and services.
IMPROVE BORROWING POSITION
Have you ever borrowed money for capital improvements? Did you notice that the bank reviews your receivables to determine how much to lend to you and at what interest rate? Companies that use collections management software have healthier accounts receivable and qualify for more money at a lower rate with a huge potential savings over the course of each loan.
REDUCE BAD DEBT WRITE OFFS
According to Paystream Advisors, companies using accounts receivable collection management software systems typically reduce bad debt by 15-25% because they identify and resolve disputes sooner, preventing them from aging to the point where they’re uncollectable. Let’s put this into perspective, a $10 million company is writing off $400,000 annually. A 20% reduction provides a savings of $80,000 each year!