Collections are vital to accounts receivable teams and the overall health of your business: they help optimize cash flow, reduce bad debt, nurture customer relationships, and enable effective financial planning. By prioritizing collections, businesses can achieve sustainable growth and get paid faster.
So what tools make for a better collections process? Ultimately, it comes down to two key technologies: a strong ERP system and a reliable accounts receivable automation solution.
An ERP system is an accounting system that often serves as a centralized hub integrating various departments – including finance, sales, and customer service – to create a seamless flow of information and enable real-time collaboration between internal teams. These accounting systems play a crucial role in organizing and storing key data for accounting teams; so much so that 89% of companies today view them as a necessity.
While ERP systems like Oracle NetSuite are a gold standard for accounting tools, they often lack specific AR management and automation functionality. This is where an AR automation tool like Centime comes in. This article will show you how to optimize collections with NetSuite, using automation tools to get paid faster and maintain healthy cash flows.
What is the Collections Process within Accounts Receivable?
The AR collections process revolves around gathering outstanding payments from customers who have purchased your goods or services on credit. The key steps of the AR collections process include:
- Identifying Overdue Invoices. AR teams constantly monitor outstanding invoices so they know when to begin executing collection efforts for late payments.
- Communicating with Customers. Next, staff reach out to your customers and remind them of their late payment(s). They will continue to call the customer and send them written notices, often referred to as dunning letters, at fixed intervals.
- Finalizing a New Payment Plan. Once in contact with the client, it's time to either get their payment information immediately or establish a new payment plan.
- Adjusting Credit Terms. At this point, teams may choose to change the customer's credit limit depending on their payment history.
- Settling Payments. Lastly, if the customer establishes a new payment timeline for a late payment, it's important to hold them accountable to this new plan. AR teams will closely monitor their payment due dates and keep in touch with customer teams in case something goes awry.
What are the Benefits of Optimizing Accounts Receivable Collections?
The AR collections process is responsible for a significant portion of a company’s inflows. Therefore, it directly impacts a company's financial health and overall operations. Here are a few key benefits of optimizing your AR collections process:
- Better Cash Flow Management: Efficient collections ensure a steady inflow of cash, enabling your business to meet its financial obligations.
- More Working Capital: Timely collections minimize the amount of capital you have tied up in unpaid invoices.
- Less Bad Debt: An organized collections process helps identify and address payment issues early. This reduces the risk of accounts converting into uncollectible debt.
- Stronger Customer Relationships: A customer-focused collections approach can not only maximize your number of timely payments but also improves your client relationships.
What Are the Key Challenges in Managing Collections?
There are several challenges when it comes to managing collections. One challenge is finding the right balance between maintaining strong customer relationships and pushing clients for timely payments. While you don’t want to damage your customer relationships by pestering them with never-ending payment reminders, it’s crucial that you get paid on time. Otherwise, delayed payments can lead to cash-flow issues. In fact, 67.9% of firms that receive more than half of their payments late report cash-flow problems.
This brings us to the next challenge of managing collections: maintaining a steady flow of cash. Mismanaged collections often cause a rise in late payments and bad debt, disrupting your cash flow. This directly impacts a business’ ability to cover expenses and invest in growth initiatives.
Identifying and contacting customers with late payments is another key challenge for collections. According to a survey by Thomson Reuters, 62% of AR teams lacked the current contact information for their customers, whereas 29% of respondents reported difficulty identifying and getting in touch with clients regarding outstanding payments.
Lastly, many AR teams rely on manual collections processes. This approach slows down the AR workflow, dragging out payments and increasing your risk of errors along the way. These delays and errors from manual processes are another common challenge for teams that use traditional AR methods.
Accounts Receivable and Oracle NetSuite: An Overview
Oracle NetSuite uses customer and payment records to track clients with late payments and send them payment reminders. While this is helpful for small teams or those with few customers, manual collections can quickly overwhelm growing teams or businesses with numerous monthly invoices.
NetSuite Integrations
NetSuite doesn’t have any advanced AR automation in its product, so many companies integrate their NetSuite accounting system with an AR automation solution to help streamline collections.
For example, Centime's AR automation solution leverages data from NetSuite to automate timely and manual collection tasks, like sending personalized payment reminders to customers, applying late fees, and tracking payment trends across clients.
Beyond streamlining collections, Centime even fully embeds within the NetSuite user interface to create a better customer experience overall. By integrating Centime with Oracle NetSuite, businesses can better understand customers' payment behaviors and tailor their collections strategies accordingly to get paid faster.
4 Ways to Optimize Collections in Oracle NetSuite
AR Automation
AR automation streamlines tedious and redundant tasks like invoice generation, payment reminders, dispute resolution, and customer communication. This reduces manual workloads and ensures consistent and timely contact with customers. For example, Centime’s platform integrates with NetSuite so you can track payment statuses, aging reports, and customer interactions all without leaving NetSuite.
Custom Rules and Workflows
Whether it's the preferred payment type or payment timing, each customer is different and should be treated as such. Your business should embrace a tech stack that enables you to build custom workflows and collection strategies for your various customers, based on their payment history.
Digital Billing Portal for Quick and Secure Payments
Offering a B2B payment portal makes it easier for your customers to make payments online using their preferred methods, adding convenience to the user experience. This self-service option clearly shows your customers how much they owe, giving them a single place to handle all their billing needs and make payments effortlessly. This approach is a sure-fire to get paid faster.
Reporting and Analytics
Make use of reporting and analytics tools to provide valuable insights into your AR collections process. This can help you optimize strategies to improve customer relationships and cash flows.
Streamline Collections With Centime
Having an efficient accounts receivable (AR) collections process is crucial for the financial health and operations of your business. A well-functioning collections process ensures a steady cash inflow, enabling you to cover operational costs and invest in growth. Moreover, it improves working capital by minimizing the amount of cash tied up in unpaid invoices.
Lastly, a streamlined collections process not only strengthens customer relationships but also improves payment timing, fostering goodwill and encouraging repeat business.
Overall, an effective AR collections process serves as a cornerstone of a stable business. On the other hand, inefficient collection strategies can slow down the process and result in overdue balances. By leveraging Oracle NetSuite and Centime, you can optimize your AR collections, reducing past-due balances and providing your business with more available cash.
We hope that you’ve found this article valuable when it comes to learning how to optimize collections with Netsuite. If you’re interested in getting started with Centime then please schedule a demo with us today.
