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Leverage insights to understand how to collect from your customers

Caroline Schneider
May 28, 2020

Do you really know what makes your customers pay earlier or later? Is your team focusing on the customers who really need a call or email to pay their invoices?

Here’s some good news­ – customers will pay early if you know exactly when and how to engage them.

To really know your customers and understand how to focus your collections efforts, it’s important to analyze your customers’ behavioral patterns by looking into certain, directly relatable variables. These can include contact methods and times, payment dates, propensity to pay, dispute triggers, customer type, location, industry, and other important data elements.

Let me tell you a true story from one of my clients. A global management services company had been trying to reduce their days sales outstanding (DSO) for a considerable amount of time and needed help to understand how to focus efforts. A high DSO means it takes longer to recover payments on services, which can lead to cash flow issues. This can be a result of several factors, including extended terms, process issues, credit policies, collections activity, and customer payment behavior.

We collaborated with our Insights and Data team, to deploy our Insights 360 solution to model DSO reduction scenarios against the organization’s customer data. This helped to understand exactly how to collect from their customers, isolate the right customers to target, and understand whether to call, email, mail, or take a different cause of action. We helped the organization understand exactly what is happening in their collections process by analyzing and correlating current and historical data across their order-to-cash (O2C) process.

We used a predictive model that leverages machine learning and a random forest classification model to map each customer’s past behavior within the O2C process. We also analyzed customer buying behavior, whether they pay early, on time, inconsistently, or late, and a number of other factors around reactions to interactions, communications, payment, disputes, and deductions trends. We were able to deliver a clear roadmap to approach collections on all of the aging buckets, reducing rollover, while focusing on customers that could deliver a 10-day DSO improvement just in time for the organization’s year end.

Without insights, it’s difficult to identify the right accounts, and most teams tend to focus on what they feel is obvious, high past due, or oldest invoices. This doesn’t result in a fast enough reduction, especially when you have new invoices aging.

Unlocking the power of data by leveraging insights and analytics can help you really know your customer and understand where to focus your efforts.

Read other blogs in this series:

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Caroline Schneider has been delivering and designing O2C solutions for clients for over 18 years. She is passionate about delivering solutions to clients to maximize their working capital through technology, automation, and industrialized process design.

Chandrasekhar Nukala has been delivering strategy, consulting, corporate finance, and business & finance analytics projects for over 15 years. His primary focus is solving client business challenges and delivering value using advanced analytics, including predictive and AI, and strategic frameworks.