If you’ve been reading our blog then you know the many benefits of automating credit and collections, such as improved customer communications, deep insight into data, faster collections, reduced financing costs, etc. But recognizing those benefits is only possible when you choose a system that will best fit your business needs. Choose the right credit management software and you stand to see significant improvements in your cash position. Choose the wrong software and you may be putting the financial health of your company at risk. Here are a few important things you need to understand to avoid the latter.
HOW CREDIT MANAGEMENT SOFTWARE HAS CHANGED OVER TIME AND WHAT IT MEANS FOR YOU
While it is unclear when credit management software was actually created it’s likely that early ERP and PC-based accounting software included some features common in today’s specialized accounts receivable business software. While the exact origns of the software is unknown, one thing is for certain- things have changed since it first came on the scene. For example, cloud computing has exploded and there is an increased focus on accounts receivable as a growth driver. Because of these and other changes, the technologies have matured and adpated too.
Where there once only a few software options for larger businesses, today there are a variety of modern-day credit management software applications to choose from – each with their own strengths and weaknesses and a vast majority of which that did not exist just a few years ago.
For you, that means that you have to do some careful research and evaluation to ensure you’re choosing the right system. This guide can help.
WHAT PROBLEMS ARE YOU TRYING TO SOLVE WITH THE SOFTWARE?
Any software project, whether you’re looking at ERP software, CRM, or credit management software, should all begin with the same first steps- identifying your problems and setting goals. So ask yourself, why are you looking for a solution? What problems are you trying to solve? Once you’ve defined your problems you can set goals and find a solution that has the features and functions to help you meet them. Some examples of these goals include:
- To reduce bad debt by X%
- To reduce average outstanding receivables by X%
- Decreased cost of credit by X%.
- Reduction in invoice disputes by X%.
- Reduction in dispute resolution time by X%.
UNDERSTANDING THE MARKET TODAY
We have already touched a bit on how the software itself has changed, but that’s not the only thing you need to grasp. You must also think about how the market has changed and the various players (software companies) within in. Here are a couple key points.
- What is the background of the software vendor you’re considering working with? Have they been around for a while or are they new to the game? Many newer cloud companies seemingly popped up overnight from venture capital investments and brut marketing force. Only time will tell if these new players will remain relevant in the long term or if they are simply cashing in on a market opportunity before they sell out. Other vendors have a long history in business credit management and will likely provide business applications with complex and feature-rich credit management modules but may provide little or no accounts receivable collections capabilities.
- Do the vendors have experience in other business software areas? You’re system will need to be integrated into your ERP system, so a vendor with experience in ERP is ideal to ensure a strong integration.It is also important to understand how each vendor integrates their business applications with your ERP or accounting software. Ensure that you select a vendor with a solid background and reputation in the industry with a strong integration strategy to ensure your success.
GENERAL OR ERP-SPECIFIC?
While there may be a few expectation to the rule; there are generally two types of credit management software solutions available in regards to your ERP or accounting system. A general one which was designed to integrate with more systems and others that were designed exclusively to work with a specific ERP or accounting application. Here are a few things to think about:
- General CCM business applications will typically have more functionality, can be maintained across ERP deployments, and are generally the better way to go because of a higher value proposition and expected return on investment.
- ERP specific solutions tend to have limited functionality as there is a smaller market for them to sell into meaning that there is less opportunity to grow revenue to support future product development. Another important consideration for ERP-specific CCM vendors is how much effort to put into development of new features. Many of these applications were developed a long time ago and while the publishers may maintain them, they may not add significantly new features unless paid for by the customer.
- Do you think you might switch ERP systems in the future? If so you may want to consider a general solution that can work with your current system and any potential future applications.
B2B OR B2C?
Just like your ERP system may be specialized for your industry, there are different types of credit management software too. Many companies get confused because B2B and B2C collection applications share some features but are drastically different too. For a B2B system, auto dialers and skip tracing are not usually desired features. It is important to identify specific requirements and understand which features are included in each of the CCM business applications on your short list of potential solutions.