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Frictionless finance means eliminating collections

February 11, 2021

Routines can turn us into finance and accounting (F&A) automatons – blindly following our processes. But you need to think about what your organization gets from not challenging these processes, and then ask: “is this best for my business/customer?”

Cash collections is built on process friction

Someone once asked me, “what if we don’t do collections?” I often challenge clients by asking the same question. What if organizations focused on eliminating collections? If you remove process friction from order-to-cash (O2C), a frictionless future means less collections calls.

We collect from customers because most teams believe that you have to call a customer early, or they won’t pay on time. This is untrue. However, during collections calls, collectors often hear that the customer:

  • Has already paid an invoice/just sent the payment
  • Has not received their invoice/statement yet
  • Is trying to resolve order or invoice issues.

Collectors call because they think they need to, and because most core organizational processes and technologies often make paying on time difficult for the customer. However, if you improve your processes, connect systems and data, and reduce process friction and exceptions, most of your customers can pay within – or close to – their credit terms without intervention. For most organizations, cash flow is not the primary reason for late payments.

Removing friction improves billing

One sure-fire way to remove friction from your collections is by improving your billing and invoicing as this will reduce the amount of collections calls overall. However, accurate invoices are key here. If you optimize these processes and synchronize data across parties and systems, you can minimize disputes and claims, which increases the number of invoices paid without intervention. Accurate invoicing, means fewer payment delays.

Within many organizations, up to 20% of invoices will be in dispute or require correction, while 80% will be billed correctly or accepted first-time. In theory then, if you apply automation, data orchestration, process improvements, and insights to the 80%, improving data quality and invoice accuracy will enable you to eliminate a lot of non-value-added work for your team, and stop wasting time calling customers who are going to pay anyway. In short, focus more on invoices causing friction and setup a digital alert system to bring visibility to billing and invoicing issues and anomalies.

Next, analyze your data to understand how your customers pay, and eliminate effort around customers that self-pay, or always pay on time. Most of your customers are also not going to delay payments.

With the right technology, you can predict which customers will default or have issues paying on time. This enables you to focus your collectors on these customers and avoid dealing with anyone who pays on time consistently. In addition, once you remove the friction around invoicing such as creating rework, double checks, and fixes, your teams can focus on more business-critical tasks such as high-value activities and improving customer experience.

Friction lurks in your emails

Want to find friction points? Review your customers’ emails. After all, a key collections issue is resolution time – as organizations never really try to address the root of the problems outlined in these emails. However, with the right technology, and data review you can unlock the business intelligence within customer queries, assess the reason behind them, and automatically index, route, and resolve them.

That same data can then be used to transform your upstream processes. This is why your teams need to rethink traditional routines and focus on fixing problems and automating low-value activities.

Moving to a touchless solution

It’s time to move away from traditional collections processes and reimagine the future. When you reduce data defects, you remove process friction, which means faster payments, fewer collections, and less effort.

By focusing on improving O2C performance, you develop a more extensive understanding of your customers, driven by data quality, insights, and rapid issue resolution. This creates a better customer experience overall. If you change your way of thinking, you can focus more resources on performing business-critical tasks. All you need to do is ask yourself: “what if we don’t do collections?”

To learn more about how Capgemini’s Frictionless Finance can help you start your journey towards enhanced O2C processes and improved customer satisfaction, contact:

Joaquin Vazquez Calvo is passionate about delivering solutions to help clients maximize their working capital through technology, automation, and industrialized process design.