CAN YOU USE CRM TO MANAGE CREDIT AND COLLECTIONS?
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CAN YOU USE CRM TO MANAGE CREDIT AND COLLECTIONS?

Some companies attempt to use their existing CRM software to manage the credit and collections process. Although some of the functionality of credit and collection automation products like Anytime Collect overlaps with CRM solutions, CRM alone provides an incomplete and potentially more expensive solution.

THE OVERLAP

The process of collecting past due invoices is similar in some respects to the sales process. You maintain a list of customers and contacts, record interactions with them and manually schedule follow up calls.

Any CRM product can do all this. However, the individuals responsible for performing collections are generally not sales people so additional CRM user licenses will be required. Further, the collections contacts at a company will usually be different people than the sales contacts so they will have to be added. Further, the sales CRM database will contain many prospects and even some customers who have not purchased anything on credit who will just clutter the system for credit specialists. Further, there are two major differences between CRM and CCM:

  • CRM is designed for sales. CCM is designed for credit and collections.
  • CRM allows you to document what you’ve done. CCM tells you what you need to do.
MISSING CAPABILITIES

In order for a CRM application to include all the essential capabilities of a credit and collections management (CCM) solution it would have to provide the following capabilities:

INTEGRATE CUSTOMER AR DETAIL

Otherwise, you will have to use two systems: one to see open invoices so you can determine who to call and another to look at contacts and history.

SCHEDULE COLLECTION ACTIVITIES

Collection automation products use information about customers, open invoices, payments, credit terms, and other financial information to schedule collection activities for collectors. This important capability allows collectors to focus their limited time on the highest priority issues and not get sidetracked working less important accounts. Without it collectors have to spend time combing through reports to plan their collection activity, wasting time and potentially missing critical opportunities.

AUTOMATE COLLECTION ACTIVITIES

Collection automation products use information about customers, open invoices, payments, credit terms, and other financial information to schedule collection activities for collectors. This important capability allows collectors to focus their limited time on the highest priority issues and not get sidetracked working less important accounts. Without it collectors have to spend time combing through reports to plan their collection activity, wasting time and potentially missing critical opportunities.

PROVIDE FLEXIBLE MANAGEMENT REPORTING OF KEY AR INFORMATION

This includes aging reports as well as Key Performance Indicators such as Days Sales Outstanding (DSO), Days Beyond Terms and Average Days to Pay.

OFFER DISPUTE MANAGEMENT AND RESOLUTION WORKFLOW

This capability allows analysis of the amount and frequency of deductions and provides a process to assign and monitor responsibility for resolving disputes.

ESCALATION TO MANAGEMENT

Escalate accounts to managers or supervisors when invoices are not paid in a specified period of time or when larger invoices that represent greater risk are past due. E.g., reassign to a manager when an invoice of $1,000 or more is past due.

INCORPORATE CUSTOMER CREDIT MANAGEMENT

This requires expansion of the data elements stored concerning a customer or prospect, providing a place to store and retrieve documents such as their credit application and agency credit reports and tracking payment history.

CRM software can be adapted to address some of these points through customization or purchase of add-on products which are available for certain CRM software products. However, that adds cost for creating and supporting the customization and extends the implementation process. Further, in some systems this can create version lock preventing access to new versions of the CRM software due to heavy customization.

Trying to make CRM work for your credit and collections may sound like a great idea but it’s like using Microsoft Excel for managing the process – it can be done but inevitably it takes a lot of effort to configure a system and a process that is just another silo of information lacking workflow and rules that help you become more efficient in your processes.

MOST POPULAR SOFTWARE FOR A/R MANAGEMENT AMONG SMBS

So, what are your other options for A/R management?
Read our guide here.

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