Automation Critical for Collectors as Economy Slows

As the economy struggles, companies will need enhanced receivables and collections management capabilities to reduce inefficiencies and drive costs out of their financial operations, according to Henry Ijams, CEO of PayStream Advisors, a payment research firm. Ijams spoke during the PayStream Webinar today, "Five Finance Tools You Need to Manage in the Downturn," that covered the need for better account receivables efficiencies in the wake of the current economic environment.

Whether or not the economy is in a recession – two straight negative quarters­ – is a subject of debate that won’t be settled until GDP figures are available in future months. But the slowdown is evident and a recession is virtually inevitable, according to Ijams, who expects any recession to be shallow and relatively short-lived.

During a recession, receivables and delinquencies tend to increase, situations that companies can address through efficient financial systems, Ijams said.

Among the most productive technologies in this space are receivables and collections management automation tools, according to Ijams. Only 34 percent of treasury, finance and accounting professionals now use this technology, according to a recent PayStream survey.

Automating the collections process increases productivity and reduces overhead, Ijams said. In particular, pre-bill management and e-invoicing applications can help firms get accurate invoices to customers more quickly, eliminating many of the billing discrepancy and latency problems that lead to unnecessary bad debt write-offs, according to Ijams.

The key innovation in business-to-business collections software is workflow automation, Ijams added.

PayStream has found that the increased use of business intelligence is helping some collectors develop better segmentation strategies. For instance, a strategy engine can integrate the accounts receivable data with a tickler system and activity logs, automatically triggering the next step in the collections workflow. The software can prioritize collections activities, ensuring a consistent and efficient process.

Integrated communications tools – faxing, e-mail, invoice reprinting and auto dialers – make human collectors that much more efficient, Ijams said. “The company who puts the most touches on the street will have the best collections.”

Online debt collection firms such as Apollo Enterprise Solutions and Debt Resolve offer good solutions for those debtors, especially those who are embarrassed to talk to collectors, who would rather use a completely automated system, said Ijams. However, these online systems handle only a small portion of the debt collection market.

On the other hand, companies that fail to automate their receivables and collections management systems will find themselves at a competitive disadvantage in the marketplace, a situation that becomes more critical during economic downturns, Ijams said.