Debt Collection Software Buyers Guide
Last updated: June 01, 2023
Debt collection software manages your entire debt collection process. It starts with your database and a list of overdue invoices. It then matches money coming into those invoices and if an invoice remains unpaid for a specified amount of time, the 'debt collection' process begins.
Debt collection software is used to organize the daily job of collectors and to minimize the time spent on administrative and unproductive tasks so that they can dedicate working time to high-value tasks:
- Accelerate cash receipts.
- Negotiate with key customers in collaboration with business managers.
- Identify and resolve quickly disputes that may prevent the payment.
- Facilitate communication between departments with up to date data.
- Involve employees of the company (sales manager, customers care ...) in debt collection and dispute resolution.
- Measure performance on several perimeters and in real-time.
Features of Debt Collection Software
Oftentimes, even if you’re the only collector in the office, you’re not the only person who cares to know what’s going on with accounts receivable. Make sure to select a software system that allows for multiple users to send and manage invoices. A/R is more than an accounting function, so you may also want to consider users who are not as obvious as a credit manager or collector and what those different users would need from the system. For example, your sales team can help with collections if they have access to the system or a report to see who has outstanding invoices, credit limits, and terms as they talk with customers. A few other roles that may require or benefit from access to the software might be:
- CEO/ President
- CFO/ Controller
- Credit Manager
- Collections Representative
- Sales Representatives
- Customers (a customer portal for managing their own invoices)
- Customer Service
How are you sending invoices today? Many businesses find that emailing invoices is much more effective than sending them through traditional mail. Another option you may want to consider is a system that offers an online portal for customers where they can view and pay their open invoices via credit card or ACH payments.
The key to a successful debt collection strategy is to keep all of your information in one central location. Be sure your software can integrate with your ERP/accounting system, CRM system, email, and other critical applications. Otherwise, you will be stuck managing data in separate locations, an easy way to make mistakes and waste a lot of valuable time.
Consider why you might have started searching for debt collection software in the first place. If you are like most, it’s to become more efficient and more effective in your processes, which means you need automation. The right software system will help you automate your most time consuming daily activities such as:
- Prioritized lists
- Payment reminders and late invoice notifications
- Follow up schedules
- Creation and assignment of actions
- Closure of issues when the customer payment is received
- Escalation of credit issues to managers
- Tracking of broken promises
What type of information do you want to have on your invoices? Make sure the system you choose allows you to include all of the information you and your customer need for payment. You may also want the freedom to create your own invoice templates and save them; this is especially helpful if you have customers who require their invoices to be in a certain format before they can process payment.
ALERTS AND NOTIFICATIONS
Another purpose of debt collection software is to give you peace of mind that nothing is slipping through the cracks. A system that will alert you to important activities the moment they happen, like an invoice going beyond the term, a broken promise, or missing information on an invoice, to ensure these are always followed upon.
If you have goals for your credit and collections department you will need to measure them, so a key performance indicator (KPI) dashboard is essential in your software. A system with business intelligence features can provide collectors, credit managers, sales reps, executives, and others with a snap shot of the current A/R situation as well as more detailed reports either by logging into the software or by setting up weekly/monthly email reports.
Make sure you evaluate your options when it comes to deployment; do you want to operate the software on-premise or on the cloud? Consider whether you or other users, such as executives or sales reps who are often on the move, would need to access the software on the road. If that’s the case, a web-based system may be more appealing to you than a system that can only be installed and accessible on-premise.
Benefits of Debt Collection Software
More Effective Prioritization
Don’t waste time on smaller, low-value debtors. Data that are accurate, searchable, and centrally located means you have all the correct data at your fingertips; making prioritization possible and effective. Simply pull a report (at any stage) based on various criteria such as the value of the outstanding debt or the age of the debt and maximize the effectiveness of your limited time (even if you have a massive customer database).
Instant, Accurate Data
With automated debt recovery software, the data in front of you is real-time and accurate. Guaranteed. No double-checking required, just reliable information you can count on, and report to management with.
Scalable and Flexible
Good debt collection software has the ability to adapt to the changes within your business. It is scalable and grows with you, and is flexible enough to adjust with your ever-evolving processes.
Automation of Manual Tasks
The best part about the software is its ability to automate manual tasks and processes. Smaller repetitive tasks are taken care of automatically and you are notified as soon as an intervention or approval is required.