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 bills are sent for collection. The client must be informed of this 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. Recovery 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 they are more 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. They therefore obtain 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 event of late payment.
An entrepreneur cannot afford to waste time, let alone lose customers. The time saved thanks to 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 criteria determined.
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 10% remaining prefer another technique. By refining the strategy over time, performance can be improved simply and at low cost.
Would you like advice on how to improve your invoicing flow, avoid late payments or recover your outstanding payments? Since 1993, INTERNATIONAL RECOVER COMPANY ® supports entrepreneurs and financial managers of companies.