Under the label of “cash collection” there are several different actions and processes that are related to the collection of receivables by a company from its customers. We are talking about a field that covers both B2C (Business to Customer) and B2B (Business to Business), of course, with important differences. And we’re not just talking about debt collection and bad debt management.
Far from it: the real strategic function of cash collection is played on preventing late or, worse, non-payment. In short, prevention is always better than cure!
According to recent research conducted by Dun and Bradstreet on a large sample in the United States, up to 50% of bills and accounts are paid late. Finding updated data referring to Italy is more complicated. What we know for sure is that, in 2018 the average number of payments made on time was just 36.3%. Even more recent is the UNIREC report on Credit Protection Services, published in May 2022 (available in full here), which found that:
- In 2021 alone, UNIREC member companies handled about 40.1 million third party practices. This represents a 9% increase compared to 2020;
- Receivables entrusted for recovery to UNIREC member firms increased in 2021 compared to the previous year (+5.2%), reaching just under €106 billion euros.
The picture that emerges from this data is very telling. And the message is very clear: curating and optimizing cash collection processes is more important and urgent than ever! How to do it?
There is no one-size-fits-all solution for all types of business, of course. But in this post, we have chosen to identify the 3 best practices that we feel are most crucial. We dissect them below.
1) The credit manager-a valued role
The credit manager is a strategic and increasingly crucial figure in a company’s balance sheet. This role goes far beyond that of the old role of the “Credit Office Manager” who often dealt with inadequate tools, specifically with debt collection.
So, what does the credit manager do? What are his or her functions? What are his primary objectives?
First, the credit manager is not a “lone man in charge” but the head of a purpose-built credit management team. Moreover, he is an elastic and multifunctional figure who must be able to communicate with a company’s financial as well its sales and marketing departments. In order to perform his function in the most effective way, upstream, it will be necessary to abandon the old company models of a company divided into silos with poor communication.
The various departments must be in constant dialog and collaboration…and here, digital is a very powerful ally (we will return to digital and communication, in the next few points). Now, in concrete terms, what does the credit manager do? Let’s look at some of the more typical tasks:
- managing the granting of credit itself; concretely determining to whom, how much, and in what timeframe to grant it;
- monitor credit performance, watching the most slippery sides and touchpoints;
- design effective cash collection processes (note: here, again, the primary role is increasingly digital communication and interaction flows, to which we will return later);
- then proceed to collection, in the most effective way;
- build strategies to minimize delays, bnd subsequently, normalize average collection times on overdue receivables;
- anticipate and resolve temporary liquidity crises, optimizing relationships with banks and all possible credit fronts;
- managing possible insurance coverage;
- but also, more generally, to have an up-to-date overview of the ecosystem – macro and micro – in which the company operates No company is an island, and today this is especially the case.
In short, we can already understand that the tasks are many, diverse, and all delicate. Such work, today, cannot be accomplished without the use of the most advanced technological tools. Especially the tools that allow you to conduct an in-depth analysis of your customers. We will focus on these systems in the next section.
2) Leveraging data to get to know your customers
At its most basic level, cash collection is all about the relationship between a company and its customers (whether individuals or other companies). It is played out on particularly sensitive sides of this relationship: that is, those that involve the flow of money. That is why it is crucial.
In order to make this relationship more effective, this is why knowing your customer base as well as possible is crucial. This is the first step in improving communication (which we will focus on in the next section) and consequently collection. How can we refine this knowledge?
Here, the answer is very clear: it’s a matter of data. We often hear it repeated that, in the days of Digital Transformation, data is a company’s most valuable asset. In this case this “slogan” becomes very concrete and operational.
In fact, a company that has embraced the most mature digitization is now able to collect the greatest number of “digital traces” (so-called “Big Data“) about its customers, from a variety of sources.
And, through these traces, to have an in-depth knowledge of their characteristics, habits, and past behaviors. Of course, all of this is essential to assess, first and foremost, individual profiles when granting credit.
But not only that. Having a thorough knowledge of a company’s audience is essential for being able to divide it into segments with consistent and homogeneous characteristics.
Let’s take a very practical example; the types of customers who have a tendency to pay late are very different from each other. There are customers who may simply forget a payment, and who will immediately respond positively to the first reminder. There are customers who are always late, right up to the limit of the insolvent and repeat offender. Well, these different types need to be intercepted with very different strategies and methods.
Think of the first type of customer who has incurred an oversight and is eager to make good: approaching him too coldly and aggressively is certainly not a good idea. In fact, the risk is to lose what is, after all, a good customer.
To put it another way: today’s cash collection processes cannot be decoupled from customer communication processes. They can no longer be one-size-fits-all.
But they must be increasingly tailored, close, data-driven, all the way to personalized communications. And this brings us to the third and final best practice.
3) Revolutionize communication – data-driven, personalized, omnichannel
What is the result of the careful operation of collecting and organizing data about customers that discussed in the previous point? We will elaborate.
Knowing your customers is the starting point for completely re-designing corporate communication, even when it comes to cash collection and debt collection.
The shift to be made is from a one-to-many to a one-to-one perspective. This is what we mean by personalization: the construction of communications that are tailored to each individual recipient, in a simple and automated way. And that’s not all: we want to isolate two additional keywords.
The first is interactivity: personalized communications can overcome even the barrier of mono-directionality, and turn into a dialog between company and customer.
Think about how useful it can be, for example, to include a call to action directly in your communications that lead to a digital payment.
The second keyword is omnichannel. In the past, cash collection management often relied on channels that were often very bureaucratic and almost always analog. This can no longer be the case today.
One’s communications must be distributed digitally, certainly, but they must also be optimized for different devices. Indeed, we are all increasingly accustomed to consulting accounts or invoices via smartphones and to paying through simple and clear procedures, in just a few taps. This kind of experience definitely needs to be transferred to cash collection processes as well.
We want to close by emphasizing a key aspect.
The restructuring of credit management teams and their dynamics; the expansion and digital organization of Customer Relationship Management systems; the decisive renewal of its lines of communication with the customer, with the boost of personalization: all of this must stand together. It must be part of a new holistic view that companies embrace.
And this 360-degree transformation is what Doxee is all about.
A starting point are the products in Doxee’s Interactive Experience line, which offer the possibility of creating personalized minisites (Doxee Pweb) that are tailored to the individual user; or personalized videos (Doxee Pvideo) that can adapt to the needs of each specific recipient and are, therefore, the real breakthrough in one-to-one digital communication.
All of this has a formidable positive impact on one’s communications; and— with it—of one’s cash collection processes.