Improve your processes with cash collection
For this, it is necessary to streamline communication with customers, identify and resolve disputes quickly, and apply one or more recovery scenarios based on the typology of customers.
The dunning actions are conducted on time and in a neutral but demanding way, in a funnel to quickly eliminate any "reason" justifying the non-payment of invoices.
Chase up customers to improve your sales processThe potential of debt collection does not end at optimizing cash flow and Working Capital Requirements.
Indeed, this function represents an essential opportunity to improve the quality of its company, its products and services provided.
Late payments can be considered as a box in which there are all the invoices which are the object of a disquality in the broad sense of the term.
This disquality can have a material origin (delivered product which has a problem ...), immaterial (service not or badly realized ...) or results of a defective internal process.
Most of the dysfunctions of a company can be found in this box, which is an opportunity to identify and treat them..
Examples of "unpaid" - "internal cause" relationships
|Incorrect or incomplete invoice||Problem of wording, price, missing purchase order number ...||Deficient invoicing process, contractualisation not clear enough ...|
|Customer cash flow issues||The customer does not have the cash needed to pay his bills||Gaps in the assessment of the financial health of its customers and the adaptation of payment terms (reduction of payment terms, obtaining guarantees ...)|
|Delivery not in accordance with the purchase order||Incorrect or incomplete delivery||Logistical problems. Gaps in the management and processing of orders.|
|Deficient quality||Defective product||Production problem or if it is outsourced quality controls on supplier deliveries|
|Invoice blocked by Accounts Payable (A/P)
||Missing validation in a system, administrative blocking ...||Gaps in the quality of customer recovery. The recovery manager must understand the organization and validation process of the invoices of his customers in order to intervene with the right person at the right time to unlock the payments.|
- Nothing is done to improve the aging balance and the cash.
- The opportunity to improve internal processes with unpaid invoices is not used because it is ignored.
How to implement this improvement?
Step one: identify the causes of late paymentsIdentify for each late invoice the reason for non-payment. This work of qualification of the accounting documents is essential to evaluate the main issues.
- Qualify late invoices with a "status" corresponding to the cause of late payment.
- Quantify the statuses based on the amount of bills and their number.
A. Invoicing issues:
B. Dispute on delivery or service performed
- wrong name on the invoice
- missing information (PO, ...)
- invoice issued too early or too late
- price issue
C. Administrative problem
- quality issue
- quantity issue
- does not correspond to the order
D. Buyer creditworthyness issue
- customer Accounts / Payable process misunderstood or not taken into account
- problem on the payment terms applied (sales conditions against purchasing conditions, special conditions set?)
E. No effective collection actions done
- cash issue
- financial dependence
- company in a situation of default or near default
- laxity in debt recovery
- reminders directed to the wrong contact
- bad accounts receivable management
Step Two: Consolidate Results
Sample summary table
|Status||Total amount||Invoices number||Customers number|
|A. Invoicing issues||16 500 €||20||10|
|B. Dispute on delivery or service performed||45 600 €||58||18|
|C. Administrative problem||2 500 €||4||3|
|D. Buyer creditworthyness issue||24 500 €||14||8|
|E. No effective collection actions done||32 400 €||56||34|
- B. Dispute on delivery or service performed
- D. Buyer creditworthyness issue
- E. No effective collection actions done
Third step: correction and controlThe details of the causes evaluated by amount and recurrence allows to launch an action plan to solve the problems identified.
Ongoing evaluation of the causes of late receivable will help to see improvement and guide new corrective actions. This work allows for continuous improvement of internal processes.
Qualify your invoices in My DSO Manager
My DSO Manager is an innovative cash collection software that allows to associate with each invoice a status (promise of payment, technical dispute ... etc.) and a comment, then to see in the reports the result of this work.
My DSO Manager keeps the entire invoices history and include a dispute workflow that makes possible to quickly resolve the causes of the outstanding invoices. See the online demo.