Extending credit to customers is a common practice in the business-to-business (B2B) space. Credit allows businesses to make bulk purchases and meet their customer needs. According to a 2023 survey, 85% of B2B buyers want to buy goods and services and postpone payment to suppliers. In addition, 60% of surveyed professionals stated they prefer credit for big purchases.
As a business owner, accountant, chief financial officer, or finance manager responsible for payments and collections in your organization, such a high proportion of sales on credit can hurt your working capital if the customers do not pay you on time.
With late payments on the rise in the business-to-business landscape, companies with ineffective collection strategies suffer cash flow shortages. Strained cash flows make it impossible to meet crucial business obligations such as paying employees and suppliers on time.
Collection teams in organizations face various hurdles in following up on customer payments, often struggling with bad debt and late payments. Fortunately, debt collection software can streamline the collection process and achieve better results. This tool automates and simplifies the collections process, allowing you to prioritize key customers and streamline communication.
The B2B Debt Collection Process
B2B collections involve collecting unpaid invoices from companies or businesses that owe money to another entity. Debt collection helps maintain a business’s financial stability and ensures timely payments to suppliers. The collections process involves identifying the customers who owe your business money, contacting them, negotiating with them, creating a payment plan, and following up. Each step may face hurdles that affect the overall debt collection process.
Common Mistakes in the Collections Process
Debt collections management can be challenging due to the size and nature of transactions. The challenges may lead the collections team to make the following common debt collection mistakes:
- Lack of documentation: Failure to maintain proper records of invoices, communication, and payment agreements makes tracking due payments and resolving disputes difficult.
- Poor communication: A complete lack of communication or poor communication between a business and its customers can lead to misunderstandings. These misunderstandings can lead to late payments, partial payments, or violations of contractual terms.
- Relying on manual procedures: When your collections teams rely on manual procedures that are time-consuming and tedious, they spend many hours on repetitive tasks, diminishing job satisfaction. Manual procedures can also lead to errors. To eliminate these challenges, you should use modern debt collection tools.
- Failure to follow up: The team assumes the customers will pay on time without reminders.
These mistakes can be eliminated by adopting collection software solutions that make the collection process easier.
What Is a B2B Collections Software?
Debt collection software is a tool designed to automate the payment collection process for businesses. It serves as a centralized platform that streamlines the entire B2B debt collection process, enabling collection teams to overcome challenges they face with conventional collection methods and maximize their recovery efforts.
Modern B2B debt collection applications harness cutting-edge technologies such as data analytics, machine learning, and artificial intelligence to make the tools more efficient. Debt collection software reduces the risk of errors and late payments.
How the Collections Software Works
The debt collection software integrates with your organization’s existing accounting software and other finance operation tools. The automation features allow you to send outgoing reminders to your customers about their pending payments. Depending on the customer and your organization’s preference, these reminders or notifications can be sent through phone calls, emails, or text messages.
A good example of these modern collection tools is ARMstrong, the best debt collection software on the market. Owned by Altus, this software is a customer-focused commercial collections platform built on Salesforce, the world’s number one customer relationship management (CRM) software.
Why Use Debt Collection Software Over Collection Agencies?
One of the methods businesses use to collect debts from their customers is to contract debt collection agencies. However, this is a more expensive approach than single collections software. Some agencies can charge as much as 25% of the invoice amount owed to your business. With a B2B debt collection system, you do not have added expenses for the collection processes.
Depending on the collection approaches the agencies take, using collection agencies may sometimes lead to strained relationships with your customers. If the agencies are harsh to your customers, they may not bring return business after payment.
6 Benefits of B2B Collections Software
Many businesses in the B2B space are looking for solutions that can speed up their debt collection processes without compromising other business operations. Debt collection sy
stems like ARMstrong stand out as the ideal solution for modern businesses looking for modern and efficient approaches to debt collection. Debt collection software offers several benefits:
1. Automate Collection Process
One of the major benefits of debt collection systems is automation. Collections automation for B2B companies means you don’t have to hire extra staff or spend more time performing repetitive tasks. Manually calling, sending emails, and reminding customers about their debt takes a lot of time that can otherwise be utilized more productively in the business. Manual processes are also not scalable, and as your business or organization grows, the processes cannot keep up with the growth.
Debt collection tasks that can be automated include:
- Payment reminders
- Sending emails
- Offering net terms
2. Centralized Data Location
Integrating payment collection software with your accounting or financial system makes it possible to centralize data. The debt collection system can access customer data and track payment history on a single platform. Centralized data and in-built analytics allow you to use expected payments to confirm statistical cash forecasts, enabling you to manage your cash flow accurately. You can view your outstanding invoices at a glance, and KPIs are automatically calculated for you.
3. Improve Customer Relations
Maintaining good customer relations is as important as collecting debts on time. You don’t want to send them a reminder before their invoice is due, and you also don’t want to generate an invoice plagued with errors. The software minimizes the chances of errors that are common in manual processes. The system ensures customers receive accurate invoices, discounts, or duplicates and minimizes the chances of disputes arising.
The automated, timely reminders are helpful to customers and allow them to schedule payments appropriately. If there are any disputes, the software provides a simplified method of managing them and automates many of the dispute resolution tasks. This means the disputes will be managed and resolved quickly.
Debt collection software is designed to make payments easy and help your business or company get paid faster. The system offers your customers payment options such as credit cards, wire transfers, and debit cards.
4. Enhance Efficiency
The convenient payment methods make it easy for your customers to send payments, increasing the chances of them completing the payments on time. The automated processes mean your employees or colleagues in the collection teams can save time and focus on more important tasks than manually managing each overdue customer account. This means an investment in B2B debt collections software increases your team’s productivity.
5. Minimize Risks of Late Payments
The automated payment reminder functionality is one of the most crucial features of a debt collection system. It reduces churn rates and risks of late payments by reminding your customers about their payments. The essence of automated reminders is to ensure all your customers get notifications with the correct information and at the right time.
Some critical information to include in the reminder:
- Invoice reference
- Invoice amount
- Payment instructions
- How overdue the payment is
Collections software can also help you identify accounts that are at risk of becoming bad debt. The system tracks invoices with the longest payment cycles and, therefore, at risk of becoming bad debt, enabling you to implement measures to collect the payments as soon as possible. For example, you can set up an email sequence directed to customers who regularly pay their invoices late.
6. Make Data-Driven Decisions
Manual processes cannot analyze data as effectively as you’d wish before making decisions. Collection software collects and analyzes large amounts of data, giving you valuable insights into customer payment patterns, behaviors, and overall debt collection performance. These insights allow you to make data-driven decisions, improve your collection strategies, and identify areas needing improvement.
Important Features of a B2B Collection Software
When shopping for a debt collection system for your organization, you should consider the features that come with the software.
Automation
Automation is one key feature to look for in a debt collection system. Collection automation software means your team will not have to perform repetitive tasks such as sending payment reminders, reconciling invoices, scheduling follow-up actions, and tracking metrics.
Multiple Payment Options
One goal of effective debt collection is to minimize payment barriers for your customers as much as possible. If a customer can only pay using a credit card, you should ensure you have a system that allows them to do so. A good platform allows for multiple payment options, including credit cards, debit cards, ACH, wire transfers, and checks.
Besides the payment options, some collection systems have a feature that offers your customers customized payment plans. The feature allows your customers to choose how and when they pay. Integration with other global currencies also makes doing business with customers from other countries easy.
Enhanced Security Features
Your collection software should have enhanced security features to prevent fraud and protect your customers’ data. These features should include user authentication, secure payment gateways, role-based access control, and encryption. These features foster trust and confidence among platform users, especially for software that comes with a self-service platform for customers.
Integration With Other Internal Systems
A good B2B debt collection software should be able to integrate with your organization’s accounting software or any other financial management system for the company for a seamless collection process. In addition to the financial software, some collection software can even integrate with your CRM. A system that cannot integrate with your critical applications will force you and your team to manage data in separate platforms.
Analytics
Select a debt collection software that gives you and your team access to real-time data and reporting capabilities. This feature will allow you to identify trends, track performance, and make informed decisions. Real-time data-driven decisions make it possible to respond quickly to changing circumstances in your business, allowing your company to stay agile.
Choosing the Right Debt Collection Software
A debt collection system is a critical asset to a company, and you should choose a system that meets your needs. In addition to assessing crucial features such as automation and security, there are other factors to consider when choosing collection software.
Assess Your Business Needs
Assess your business’s specific needs before shopping for a debt collection system. Then, list the software features that will effectively address those needs. Consider factors such as the complexity of payment terms, outstanding invoices, compliance with regulations, and the need for automation features. You may also consider your business’s current status and future goals. Getting collection software for small businesses that can scale as your business grows means you won’t have to look for another system in the future.
Choose a flexible system to adapt to changes in your business environment, such as increased volumes of transactions, expansion into new markets, or changes in laws or regulatory requirements.
Choose a User-Friendly System
Select a system that is easy to use for your team and your customers. An easy-to-use platform ensures that customers and your debt collections team can adopt the software easily. An easy-to-use self-service platform allows customers to take control of their debt journey, enhancing their debt management experience.
Compare Systems Based on Price
After selecting systems with your preferred features based on your business needs, you can compare them based on their scalability, compatibility with your existing systems, usability, and prices. Pricing considerations include upfront costs, subscription fees, support service charges, and customization charges. It’s also important to assess the quality of customer service offered.
B2B Debt Collection Best Practices
The following tips will help you improve your debt collection results:
- Send reminders in multiple channels: Send regular reminders about pending payments. It’s easy to schedule these reminders with automated software.
- Offer flexible payment options: Offer your customers options to pay using their preferred method.
- Offer discounts: Discounts can encourage your customers to pay early.
- Conduct credit checks: Conduct credit checks on your customers before extending them credit.
- Empower your collections team: The easiest way to increase the capacity and effectiveness of your debt collection team is to invest in debt collection software. You should also provide them with specialized training sessions, update them on changing credit policies, and conduct personal review sessions to identify their challenges and offer guidance.
- Automate the collection process: Use technology to minimize reliance on manual processes and increase your team’s operational efficiency.
Join Altus for the Best Debt Collection Experience
Using the right tool can minimize bad debts and allow you to get timely payments for easy management of your cash flow. Investing in ARMstrong by Altus empowers your organization and collections teams to achieve better debt collection results.
Altus is a global business process outsourcing (BPO) company that provides global commercial collections. We are licensed in 49 states in the U.S. and in every jurisdiction throughout North America. We use a powerful, customer-focused collection automation software called ARMstrong to streamline key functions of the debt collection process. Contact our team if you have any questions or want more information.
