Companies in India face a number of organizational challenges that get in the way of effectively managing their collections receivables.
Because many of these processes are still being developed and fine-tuned, there are many challenges to work through, which include a lack of efficient infrastructure, limited capital, and outdated technology. Not surprisingly, these challenges also get in the way of overall operations and result in a disturbed cash flow.
Small and Medium Enterprises (SMEs) are also impacted by these challenges; the ambient environment for SMEs can also be prohibitive to their growth, especially because loans and approvals are not easy to come by.
When SMEs turn to private lenders, they’re often faced with high interest rates, making the payback process critical and cumbersome in the face of outstanding receivables.
It’s easy for this to become a vicious cycle for organizations of all sizes.
Common Collections Mistakes made by SMEs
Let’s say we have a database of 100 clients with payments due. Of these 100 clients, 70 always make payments on time. 20 of these clients might be habitually late with payments and 10 of these have gone into deep lapse, i.e. a customer base that has become completely unresponsive with significant payment delays (90 days or more).
“A very important concept to understand is that all customers are not cut from the same cloth” says Aditya Bhushan, Managing Director at ATS. “If the loyalists are approached with the same tactics as the stragglers, you risk delaying your payments even further. In 17 years, we’ve seen this occur many times.”
A delayed payment loop is definitely not the outcome we need. But there is a way to manage the collections process more efficiently, and it’s rooted in understanding your customer’s payment behaviour patterns, dispute resolution procedures, efficient follow-up and escalation, proper monitoring.
Can a Collections Receivable Backlog be Prevented?
With a combination of intelligent segmentation, analytics, and timely outreach, collections receivables backlogs can be prevented.
- Segment Your Data
Segmenting and correctly labeling your data is a crucial first step. If 70% of your customers pay on time with minimal reminders – even better if they’re on autopay! – then we recommend you don’t disturb them with repetitive or unnecessary messaging.
- Identify Risk
Strong analytics and experience are important for identifying risk. Once you have a window into an established payment or behaviour pattern – e.g. some people avoid calls from collectors – you can determine the risk of non-payment.
This is the point where we typically step in for our clients and recommend next steps. When we identify the segment perpetually in deep lapse, our experts look into each case selectively and approach towards a negotiated settlement.
Prioritize Human Intervention
A phone call or an automated message? An email or a text? One message or a series of reminders until the payment comes in? Once you’ve segmented your target audience and identified the risk, you can prioritize how much human intervention a particular customer will need.
In the example we’ve mentioned above, 80% of the clients make timely or slightly overdue payments. In our experience, these clients do not require special intervention for payment reminders. Moreover, the time and effort saved here can be invested into tougher accounts in order to improve the overall collections efficacy.
Implement Digital Outreach
Once you’ve decided your mode of communication (text, email, phone call), you must automate and digitize your outreach process. We’ve built processes and software for our clients that allow CRMs to integrate with emails and diallers to initiate payback. Most often, a full human resource is not required for this outreach.
A digitized and analytics-based follow-up isn’t just the way forward; it’s the most efficient and economical way forward. Talk to us about how we can set up this process for you.