How Integrated Receivables Reduces Past-Due Payments and Disputes

This article is the third in a series of four detailing how an Integrated Receivables (IR) system functions and can transform the way a business manages their receivables.  

First in Series: How Integrated Receivables Increases Cash Flow for Businesses 

Second in Series: Cash Application Replaces Manual Processes with Automation 

Very few integrated receivables (IR) platforms provide collections modules, with most focusing solely on cash application. Learn more about the unique benefits of the collections module.   

Collections Management and Automation 

Past due payments are essentially free short-term loans for your customers. While still fairly new and unique, some integrated receivables (IR) systems provide modules with collection management capabilities to help prevent and convert those past due receivables into cash. This is done with the use of sophisticated AI to help determine your client’s future risk of delinquency, automatically adjust collection strategies based on that risk, prioritize delinquent accounts for optimal cash flow, and provide automated outreach for accounts at a lower risk of delinquency. These parameters are generally also all configurable to your company’s preferences. 

Most IR systems with collections platforms use AI and automation support to improve cash flow in the collections process in three main areas: 

• Identification: Calculating a customer’s willingness to pay. 

• Prioritization: Adjusting strategies and priority of a contact.  

• Coverage: Contacting your entire portfolio multiple times throughout each collection period.  

Not all customers will be approached in the same way. For example, some platforms can send low-risk customers automated email reminders when their payment is due. If a payment is not received in a certain number of days, another automated email can be sent. Conversely, a high-risk customer can be sent an automated email days before the due date to help remind them to pay you on time. If the payment is not received by the payment’s due date, the IR system will add this client to your collector’s call list for the day ensuring a person reaches out and requests payment.  

The best IR platforms allow you to define the collection strategy and templates used in any automated outreach activity based on a client’s risk level. These systems use data such as customer payment history, credit bureau data and amount owed to determine risk levels. Some systems provide even more automation through email integration. AI helps the system interpret and respond according to your strategy. All actions taken are documented and available for years in some platforms. 

By combining these services into a single platform, you’ll see improvement in some of your most important metrics. Many clients who use a collections module within their IR system have the potential to see: 

• 20-40% compression in past due aging 

• 40-60% improvement in productivity hours 

• Savings on Weighted Average Cost of Capital (WACC) or extra earnings on the balance converted from accounts receivable to cash 

Dispute Workflow Enhancement 

Dispute and deduction management workflows are also an area that an IR implementation can address. Leading IR systems often include the ability to identify and code disputes and deductions during cash application. Items are then automatically routed to the appropriate team for resolution. This enables real-time collaboration between all teams involved, allows automatic escalations that reduce resolution times, and provides real-time reporting for root cause analysis and prevention.  

Prevention is the gold standard approach for resolving disputes and deductions. Once an invoice reaches 90 days past due, the chance of it ultimately being written off skyrockets. Identifying root causes for disputes and deductions is key to quickly resolving and preventing repeat occurrences. IR allows businesses to eliminate blind spots through clear tracking and reporting. Better yet, with IR, you can apply a standard process for handling disputes and unauthorized deductions across the entire enterprise. These benefits even extend to your clients. Improving the dispute resolution experience reduces the frustration that can often stem from slow or inconsistent processes. 

IR platforms may enable users to define thresholds for write-offs of short paid invoices that are not worth the time to pursue. Some businesses allow their customers to take proactive discounts on invoices in exchange for paying within a given number of days. Users can generally build rules into their platform’s dispute system that enables the tool to automatically apply the discount to an outstanding invoice, clearing the payment. Similarly, these systems can also automatically identify customers taking unauthorized discounts so they can be addressed. 

The best IR platforms enable users to eliminate their old manual processes, disparate data sources, disconnected workflows and multiple spreadsheets. This has the potential to add up to: 

• 40-60% improvement in Days Disputes Outstanding 

• 15-50% reduction in revenue leakage (the difference between a dollar of sales and collected revenue) 

• Immediate returns on investment 

IR can increase efficiency and effectiveness across all areas of receivables management. 

Look for future articles in the series to learn more about the capabilities of IR systems, or contact your Treasury Sales Officer for more information.