11 Debt Collection And Credit Strategies To Streamline Your Debt Collection Process

Banks and businesses need to conduct debt collection to get back the money owed by customers or to collect the payments for the goods or services that customers acquired on credit.  

Debt collection is a process that every bank, organization, and even individual needs to focus on as it plays a significant role in cash inflow.   

According to business news daily, there is always the possibility that certain customers would not pay their invoices on time in B2B transactions. Sometimes this is due to your clients having a large number of invoices to pay within a given time frame and forgetting about your invoice. In other instances, it's because a customer doesn't have the funds they expected to have to pay for your services or the credit they owe you. The good news is that the debt collection strategies listed below can help you reduce the number of unpaid invoices.   

If you’re a finance or a bank person who is eagerly searching for ways to reduce the DSO and increase the cash flow, then I’ll say that you’re at the right place.   

This blog will help you with some strategies to streamline and increase your cash inflow by reducing your DSO. Continue reading to know the strategies so that you can try them out and see the difference it makes to your bank.   

 

Strategies to streamline your Debt Collection Process 

1. Examine your invoices before sending 

There are 2 types of customers—the one that pays you on time and the one that needs more invoice reminders. 

Some of your non-paying clients may not have paid you yet since your invoices do not clearly state that payment is required within a specific number of days. You can reduce such errors on your end by checking your invoice and invoicing policy before sending it to the customer frequently. This method entails looking at how you prepare invoices and ensuring that each of the following is present: 

• An invoicing date,  

• Contact information for both the debtor and the creditor (name, address, phone number, and email address).  

• A specific invoice number,  

• Payment conditions and deadlines, as well as accepted payment methods,  

• An organized list of services, each with a unit price, quantity, and total price.  

• Also included is a clear and visible total invoice value. 

 

2. Review your invoicing policy

You should examine not only your invoices but also your invoice-sending policy. If you charge your customers monthly but consistently run out of cash, consider switching to bimonthly invoicing.  

Alternatively, if you usually submit invoices on the last business day of the month, consider sending them on the first business day of the following month. Your customers who make end-of-month payment runs will be less likely to miss your invoices this way. 

 

3. Examine your Invoicing Technology

Perhaps your bank generates invoices using a Word or Excel template. This method, while certain to assure uniformity, requires a lot of manual work, which might add unnecessary human error to your invoicing methods. To reduce errors and save time, consider switching to invoicing technologies such as automated debt collection software. 

An automated debt collection management system can also track client interactions with invoices, automate follow-ups for outstanding invoices, auto-populate invoice fields, and many other things. Read the blog to discover more about this debt collection management system and the impact it is having on the debt collection industry. 

 

4. Examine the invoicing communications protocol

It makes no difference how soon you send the invoice to your customers; your follow-up will be affected by how quickly you get paid. Many banks and businesses send out invoice reminders by email or SMS and then follow up on outstanding dues with quick emails; however, email may not be appropriate for more serious debts and clients who have not paid.  

Establish an internal policy of pursuing debts that are more than 14 days late using phone calls, which debtors generally find far more difficult to ignore than emails. 

 

5. Make it simple for clients to pay. 

Each invoice reminder should state which payment options your bank or business accepts (should also mention online or offline payment). However, merely listing your supported payment methods does not guarantee quick payments. 

For example, instead of simply stating that you accept Stripe and Razorpay payments, offer a clickable Stripe and Razorpay link that a customer can use to pay. 

 

6. Immediately provide your invoicing terms.  

Whether you have a distinct credit policy or standard invoice terms, you should make your invoicing process known to all of your customers. This might involve having qualified customers or clients sign your credit policy agreement as part of the initial contract, or including legal terminology on your invoices that indicate how you plan to recover outstanding debts.  

 

7. Confirm the payment process for each customer.  

It's one thing to file an invoice with your company's business contact; it's quite another to file an invoice with the accounting department. Sending invoices to your customer's contact does not guarantee that your invoice will reach the accounting team, and an invoice that is delayed in reaching accounting is paid later. Because your business contact is not frequently your accounting contact, ask your customers who should file invoices.  

 

8. Determine how to deal with customers who are consistently late.  

At least one of your clients will inevitably pay late regularly. To deal with these customers, you may tailor your payment terms to suit specific demands, but more robust tailored collection strategies are available.  

For example, if your late customer rarely answers emails but responds well to phone calls, ask your accounting team to contact this client within a specified time frame after payment is due. Alternatively, if you have encountered late payments from this customer due to a certain method of payment, offer them the option to switch payment methods. These tailored collecting strategies can persuade your customers to pay more quickly.  

 

9. Pay attention to payment.  

Rather than waiting for your payment's due date to arrive (hopefully with payment), contact the customer a week before the due date to discuss your services. Inquire whether any problems with your service may lead the customer to postpone payment. If the invoice hasn't been paid by the due date, contact again a week later, and take down any payment promises your customer makes so you can follow up appropriately. Phone calls are far more difficult to ignore than email messages.  

 

10. Don't try to do it yourself.  

Bank owners put debt collection on the back burner in favor of more immediate banking activities like planning and providing services. If you have the funds, you should consider implementing debt collection software to automate and efficiently complete early-stage debt collection.  

An automated debt collection management system may manage the whole invoicing and payment process. This includes creating and sending invoices, as well as recording payments and other tasks. A dedicated application is more beneficial than a new accounting team. If your customers have their finance teams, various companies' finance teams may understand one another's situation better.  

 

11. Implement Debt Collection Software.  

When a customer's debt is not paid, is ignored, or is disputed, you may feel it necessary to use debt collection software. Debt collection software may be used by freelancers and small banks to obtain third-party competence in collecting debts from non-paying customers, but this is dangerous. To begin with, it's a certain method to sever ties with the customer.  

However, there are situations when adopting collection software is the only alternative (besides hiring a debt collection agency).  

If you must go to a collection agency, try visiting our debt collection management system and experiencing for yourself the various automated and advanced features that are ideal for your needs. You should also become familiar with the Fair Debt Collection Practices Act so that you can be certain that your bank or business is following the law and keeping you safe from responsibility.  

Your customers might pay sooner if you combine your collection strategies with the support of third-party professionals. Simply be patient, attentive, and courteous throughout the process. 

 

Maxyfi Debt Collection Software  

Maxyfi is an automated debt collection software with several advanced automation tools for automating your debt collection process and effectively monitoring your credit risk analysis. 

Maxyfi’s Features 

1. Follow-ups that are Automated but Efficient 

Maxyfi provides automatic follow-ups that send automated invoice reminders to customers, which allows you to spend less time on manual activities and more time on cash flow enhancement. 

  

2. Workflows that can be customized and pre-defined 

Maxyfi features pre-defined workflows that can be adapted to meet your specific needs, making your follow-ups more efficient and successful. 

   

3. Unique Customer Portal 

With our one-of-a-kind customer portal, you can get your customers to pay faster than ever before, thanks to our simple and quick payment options. 

   

4. Insightful dashboard 

This intelligent dashboard lets you stay up to date on customer invoices and payment information in real-time. You can check your bank's total overdue amount, pending invoices, and top debtors all in one place. 

 

There's still a lot to learn and discover... 

We also provide a one-year free trial of our debt collection software's starter package. You can try it if you want to boost your credit risk analysis and lessen your bad debts. 

You can learn more about our automated debt collection software with a quick 20-minute session, and you can also read our Maxyfi Blogs for more thorough information.