Collect like the Big Boys: Lessons for the SMEs from the world of Multi-Nationals
27 January 2016
Picture this: you come into the office Monday morning and boot up your accounting package while sipping down on the first coffee of the day. All is looking good until you check the receivables ledger and see staring back at you 650,000 overdue invoices equating to £27,625,000. With next sip of coffee, you take 2 x Panadol and want a little lie-down.
The above scenario is real, both the volume of invoices and amount owing and is just one example of what many collection managers within some of the household names are ‘managing’ every day. The good news for you, these collection managers have run every champion challenger model thinkable across their base to ensure they optimise their collections strategy measuring DSO, ROI, Churn and CSAT.
We could ‘geek out’ about now and talk credit risk scoring, segmentation and propensity to pay but we’ll keep it high level and just focus on stages.
Early Stage (Day 1 overdue -> 15)
Automate, Automate, Automate! Like the unnamed corporate above, you can't call 650,000 people and tell them that their invoices are overdue. You need to leverage email (and probably a couple of emails!) to give them a gentle nudge.
Mid Stage (Day 15 -> 30) Automate, Automate, Automate!
So a bunch of people have paid which is awesome, but you still have 30% of your stubborn customers pretending the dog ate their email. So, change it up! Did you know that text messages are read on average within 5 seconds and according to Cellit, produces engagement rates 6-8 times higher than email? We can actually prove it from the results between sending another email (yawn) and an SMS.
Later Stage (Day 30+) Automate, Automate, Automate!
Okay, so now you’re changing it up and using a powerful mix of email and SMS... but before we high five (we love a good high five) we need to get the last stubborn people to take action. Automated voice is the secret sauce! Every collections manager will tell you that voice has the highest call to action of any channel, bar none. There is an awesome double win here. Customers actually PREFER an automated voice call regarding their debt compared to a live person as it removes the embarrassment factor for all involved. Oh, and the biggest win, you don’t have to pick up the phone!
Near Write off: (Day 45 -> Onwards)
Now it's starting to get legal and the process differs depending on jurisdiction. Typically this is where the letter is sent (required by legislation) followed by a live agent to negotiate terms of settlement. Expensive, slow but thankfully, you are only managing this for the 1% of customers that entered collections. As an SME, you need to have the same approach. Automate early and if you need to get involved, make sure its only the truly problematic customers, not the lazy ones.
So what did we learn? Irrespective if you have 10 or 10,000 overdue invoices, for the good of your business you need to ensure your collections process is effective and automated. Mix up the communication channels and use proven language at the right times. Put it all together and you’ll Undo Overdue.
Lots of love,