CHAPTER 6: COLLECTIONS
Best practice is to employ a collection software application that will automatically perform the prioritization calculations and present each collector with a prioritized list of customers to contact each day.
6.3 Collection Technology
Automation of collections is an extensive topic in and of itself. There are many commercially available collection tools (third-party add-on solutions and embedded ERP modules) that automate many of the functions of collections and provide metrics. The key functionalities are: 1. Auto-prioritization of collection activity according to the firm’s defined collection strategy. It must be flexible, as there should be different collection strategies for various customer segments. 2. Mass mailing capability to e-mail dunning letters and customer statements, which can clearly denote disputed amounts. 3. Ability to record and share collection notes, and follow up on promises to pay. 4. Ability to route disputes to designated resolvers within the organization, using a full-featured workflow capability (tracking, internal dunning, reporting of performance, etc.). 5. Extensive reporting and analytic capabilities. 6. Credit scoring that accepts online data feeds from credit bureaus, assigns weights to them according to a pre-determined formula, and calculates a credit score. 7. Automated credit holds of orders that exceed credit limit or delinquency parameters. Best practice requires that disputed amounts be eliminated from the exposure calculation and that a modest tolerance be acceptable. For example, if a customer owes $1,000,001 dollars on a $1 million credit limit, the order should not be held if this customer has had a steady payment history and the new order is moderate in dollar terms. Authorized individuals will release the order when defined criteria are met.
Automated collection technology frees up collections staff to spend more time actually contacting customers, which improves collections.
6.4 Collections Staff
Collections can be a challenging task. While training in collection techniques and skills is important, a collector’s personality has a huge influence on success or failure. If a person cannot cope with an element of confrontation and being told “no,” then he or she probably will not be a successful collector. This will be evident after a month or so if you are measuring collection activity (number of contacts, number of promises to pay) and results (cash collected, aging of their portfolio). It is important to consider the personality factor when selecting and evaluating collectors.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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