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4 ways to improve your cash flow with predictive analytics

18/08/2022

Regardless of its size, every business faces debt collection at one time or another. Financial, telephony or health care institutions, for example, use debt collection companies to get their debtors to pay their bills. After a specified period, if the invoice is not honored or the clearance plan followed, the unpaid amounts are sent for collection. The client must be informed to avoid the surprise effect and the associated nervousness, but also to encourage the client to settle his debt as quickly as possible. An informed customer is worth two.

If your customers know that you are pursuing your outstanding payments, they will be more likely to pay. On the contrary, if they do not feel followed, they could delay the payments and you risk a domino effect.

Corporate finance managers often use predictive analytics. Debt reecovery is no exception to the rule. It's interesting to be able to predict which customers (or what percentage of them at least) might be in arrears and which collection strategies are most responsive to.

 

Here are 4 benefits of using predictive analytics in your cash management :

1- to reduce your costs

Debt collection agencies have the tools and experience to expedite the payment of your bills and recover your outstanding debts. Often, they also use predictive analytics. Drawing on their experience, they have the ability to provide the right solution at the right time, on a case-by-case basis. They can therefore avoid certain unnecessary and unprofitable recovery steps for foreseeable cases. So, they obtain positive results at a lower cost.

 

2- to improve your customer relationship

Predictive models can also help improve customer relations. Predicting which customers will potentially react to one type or another of payment reminders not only saves time and money, but also helps maintain an adequate customer relationship. Some customers will be more receptive to letters, others to emails, phone calls or text messages. Some clients require firm communication. On the contrary, others require a gentle dialogue even in the cas of late payment.
An entrepreneur cannot afford to waste time. The time saved thanks to the  predictive analysis can be devoted to profitable tasks, or even to improving customer relations.

 

3- to optimize your collection flow

The management of late payments is a major economic and commercial issue for companies. It has always been important to act quickly, but now more than ever. The current economic situation does not allow companies to wait any longer. The implementation of cash monitoring is necessary for any company, regardless of its size and sector. Predictive analytics helps struggling businesses ,reduce costs and improve cash flow.
Based on historical data, for example, companies can classify their customers according to different criteria such as their profitability, their financial habits and average payment terms. It is then easier to optimize billing follow-up and collection transmission according to the various determined criteria.

 

4- to simply change your financial strategies

With predictive analytics and measuring the impacts of individual changes on your cash flow, you can easily adapt and evolve your financial strategies. The so-called adaptive control or champion/challenger test, for example, has shown that up to 80% of delinquent accounts are often ready to adapt to existing collection strategies, while 10% may favor an alternative strategy and the remaining 10% prefer another technique. By refining the strategy over time, performance can be improved simply and at low cost.

 

Want an advice on how to improve your invoicing flow, avoid late payments, or recover your outstanding payments? Since 1993, INTERNATIONAL RECOVER COMPANY ® has supported entrepreneurs and financial managers of the companies.