There's an adage that goes, “If you loan someone $20 and never see them again, it was probably money well spent." While that financial rule may be a good for your social life, it hardly works as a business model. Things get a little tricky for business owners when balances are left unpaid, and that's where an easy-to-use accounting system can really help.
According to statistics updated by the Federal Reserve earlier this year, the average American household owes $16,425 in credit card payments. You can imagine how difficult it is for small or midsize businesses to keep their doors open with that kind of money pending. Fortunately, debt collection software exists to help you keep track of outstanding invoices and manage collection efforts in order to keep your books squared away.
Here's what we'll cover:
One way to think of debt collection software is as the little brother to billing and invoicing software. It's true that these two types of programs are incredibly similar, and, in fact, many debt collection vendors offer integration with billing systems in order to streamline the collection process.
The distinction between the two is this: billing happens after a product or service is sold—within the normal course of business—whereas debt collection comes into play after the balance for a product or service becomes overdue.
Most debt collection software will integrate with either enterprise resource planning (ERP) systems or accounting software to fully automate the process. The benefit here is that you can incorporate your new debt collection system quickly into whatever program you're using now, and you can customize the software to fit your business needs.
Like most software, debt collection systems are generally priced out at different tiers or editions that offer varying services. A few elements of these packages that impact value are:
Additionally, debt collection software is available to businesses as either cloud-based or on-premise software.
Email IntegrationDramatically increases debt collection rates by making collection notices, payment options and itemized bills visible and accessible to consumers via email. As of 2016, 88.5 percent of Americans are online, meaning the easiest way to get information in front of them is electronically.
|User Types||This is a useful option if multiple people need the ability to manage invoices, such as sales representatives, credit managers, customer support associates or clients. Some debt collection systems are priced according to the number of different types of users, while others are more simply priced according to the number of general users.|
|Billing and Invoicing||Having a debt collection system that automatically works with your billing setup can save invaluable time on your end. Invoices are automatically moved to the debt collection process when they pass the due date and are identified by the system as outstanding. Additionally, these programs can generate billing paperwork without input from managers or sales reps.|
|Automated Follow-Up||This feature assumes control of the collection timeline by queueing, creating and sending out follow-up letters or emails. It also keeps track of how many notifications have been sent out and when.|
|Contact Management||Helps agents find the right contact information to ensure no time is wasted sending letters or emails to inaccurate addresses or calling wrong numbers.|
|Performance Management||Allows managers to keep an eye on collectors' history, records, rates and behavior. Not only is this important for internal metrics, but also for compliance with government rules regarding appropriate debt collection practices.|
|Compliance||This feature protects collectors from violating the Fair Debt Collection Practices Act (or any other government regulations, for that matter). Compliance applications manage the legal aspect of collection to ensure everything you and your agents do is up to code.|
|Credit Bureau Reporting||Creates documentation for reporting credit history to bureaus so that made, missed or delayed payments will be reflected in credit checks.|
|Client Portal||Client-facing dashboard where they can view pending payments, balances, notifications, and anything else they may need to verify.|
|Credit Card Processing/Online Bill Pay||Enables individuals to make payments directly and immediately without having to mail cash or checks.|
Because of the variance between debt collection software vendors and the features they offer, it's good to identify your specific needs ahead of time. Different businesses will require different things of their software.
Process and decision automation. Quite a few processes involved in collection have already been automated, including phone dialing and follow-up notifications. Analysts are looking to see even more of those small steps taken over by AI in order to make the human collector's job faster and easier. In fact, we may not be all that far away from a time when machines handle the entire process. Using collection history as a basis, systems may one day learn how to interact with consumers to track and collect payments.
Mobile technology. It was only a matter of time before cellphones became tools for collectors to reach consumers, and mobile apps are definitely leveraging that accessibility as well. Be it SMS notifications or proprietary debt collections apps, more and more vendors are taking advantage of smartphones to collect on accounts.
Data analytics. It's amazing what can be gleaned from even the most basic data, and debt collection is one market that definitely proves this. Through identifying demographics and simple behavioral trends of consumers—for example, what time of day people are more likely to answer the phone—agencies can improve almost every metric. It's a safe bet that data analysis will only get sharper in the future, both in terms of what kind of information gets collected and what kinds of assumptions can be drawn from it.
Our service is simple and 100% free to customers like you because software vendors pay us when we connect them with quality leads. You save time and get great advice. Vendors get great referrals. It's a win for everyone!