One of the most stressful aspects of running a business is collecting payments.
B2B collections software can help you track unpaid invoices and automate the many manual processes associated with painful payment follow-ups.
It is particularly useful for SMBs and B2B companies that frequently offer credit and net terms to their customers. But they often don’t have the required resources that bigger corporations may have, like a dedicated accounts receivable or collections team.
By using a B2B debt collection software, B2B companies can optimize their collections process and ensure they have sufficient cash flow and working capital to run their business profitably.
B2B debt collection is the process of getting unpaid invoices from your customers and vendors. It is important that your customers pay as soon as possible to keep cash flow moving through your business.
Delayed payments can create cash flow issues and cause a myriad of other problems.
B2B collections management can be challenging due to the size and nature of the transactions as you sell products or services to other businesses.
This makes collecting the debt even more difficult.
Richard Branson once said, “never take your eyes off the cash flow because it's the lifeblood of business.” However, to maintain cash flow, you need your customers to pay for your products or services on time.
When you sell to businesses, it is not uncommon to face challenges in the collection process. This is especially true when you have multiple invoices past the due date.
The collection process is costly, time-consuming, and risky. It can be draining for your accounting and the entire company, especially if you are a small business.
There are so many ways that processes fail to run smoothly:
- invoices get misplaced,
- poor communication between departments,
- suppliers hold back payments
The life of your business and the cash flow depends on your accounts receivables management and collection process. If not managed properly, you might run into the risk of bad debt and unpaid bills.
This is where debt collection software, also known as B2B collection software, comes into the picture.
B2B collections software is software to help you manage the collections process. It should integrate with your accounting and other finance operations tool and help you in multiple areas of collection management, such as :
- Providing a central location to track outstanding invoices
- Helping you communicate with customers about pending payments
- Setting reminders for when payments are due and track complete payments
- Helping identify areas where your company may be at risk for bad debt
Note that debt collection software is different from reverse factoring. In reverse factoring, a company gets paid upfront by a third party by lending the invoice amount to the buyer based on their creditworthiness. The buyer then pays the funds back to the lender, along with a lending fee as per the net terms in the invoice.
Many businesses also use the services of collection agencies to collect outstanding invoice amounts.
While they are trained and experienced in debt collection, this is an expensive route. Agencies typically charge between 25-30% of the invoice amount which can quickly compound into huge sums of money paid over the course of a year.
Sometimes, agencies can also lead to building a bad reputation for your business and a bad customer experience due to the harsh tactics employed by these agencies.
Instead, B2B collections management software helps you manage your collections without the added expense and risk of reputation damage associated with outsourcing to a third-party collections agency.
For example, John Sanjone, CEO of Trenchless Supply says that having reputable accounts receivable software like Resolve improves his company’s image and “clout” in the eyes of customers. They were able to "resolve" their accounts receivable and collection woes with advances of almost 50% on orders invoiced through Resolve.
B2B collections software allows you to centralize information about your customers and vendors into one easily accessible location. This can help you keep track of your collections efforts and make it easier to identify issues.
Poor communication can often lead to mismanagement of invoices and delayed payments. A good debt collection software allows you to communicate with your customers in an efficient yet effective and respectful way - that aligns to your brand.
This allows you to discuss specific payment issues directly with the customers. It also allows you to keep track of those communications through one central location.
Small and medium-sized businesses don't have the luxury of hiring extra people to their team just to follow up on outstanding invoices.
The manual process of calling, reminding, sending emails, and drafting legal request letters for collections across multiple customers takes up a lot of time.
This process is not very scalable and as the business grows, the process often cannot keep up with the growth and increase in the number of customer and accounts.
A B2B collection software can automate most of these manual tasks and can scale with your business through efficient workflows powered by APIs to improve the debt recovery and collections process.
Some of the tasks you can automate with a good debt collection software are:
- Payment reminders
B2B collections software should allow you to set reminders for when invoices are due and when payments are expected. This can help you avoid late payments by customers.
- Offer net terms
Solutions like Resolve act as complete risk and credit management and digital net terms solution for small businesses up to enterprises.
- Automated emails
Automation can also let you set up a customized email sequence once the invoice becomes overdue. This helps in streamlining the collection management process.
One of the major challenges in accounts receivables collections is prioritizing when you have multiple unpaid invoices. B2B collections software can help you identify which invoices are at risk of becoming bad debt.
It can do this by tracking which invoices have the longest payment cycles. You can then work to collect those payments as soon as possible.
The biggest benefit of B2B collection software is the support in improving cash flow by reducing DSO (Days Sales Outstanding). This is one of the key metrics to measure your collection efficiency and improve your company's bottom line. And when your company’s bottom line improves, that’s when you can focus on growth.
There are multiple debt collection software solutions in the market with different pricing and features. Here are some of the most essential features and functionalities you must consider before choosing your collections software:
Customers prefer to pay using their preferred modes of payment. Make sure your B2B collection software supports multiple B2B payments options like credit cards, wire transfers, ACH, and debit cards, and even checks.
Some SaaS debt collection software solutions also offer the functionality of customized payment plans to your customers so they can choose how and when they pay. Similar to Resolve’s “net terms as a service” offering, this can helps you build better relationships and increase customer loyalty.
Look for the main automation features like payment reminders, email sequences, tagging of unpaid invoices after the due date, legal request letter generation, and reconciliation.
Your collections software should be able to integrate with your CRM to trigger and send automated email journeys to customers based on the pending invoices.
Many B2B collections software solutions also support billing and invoice generation. With the help of templates, they can take care of everything from creating invoices to collecting payments.
A good B2B collections software allows you to track the data associated with your collections efforts. Some solutions even have machine learning models built into their systems. It can also include information about your payments and the dates those payments were made. This can help you keep track of the status of all your outstanding invoices and payments.
This is a key functionality when considering debt collections software as it can track partial payments. It should be able to integrate with your ERP accounting software, and even CRM for a seamless collection management process.
For example, when GB Fabrication started using Resolve to receive faster payments on its sales orders, they were able to quickly integrate it with their existing accounting system on Quickbooks Online.
Good B2B collections software also help you report data to collection agents as well as a credit bureau. They can create documentation to report credit history to bureaus to reflect delayed or missed payments in credit checks and comply with legal requirements.
One of the main causes of inefficiency in the collection management process is the lack of communication and coordination among cross-functional teams like sales, customer support, finance, and the accounts receivable team.
So, make sure your debt collection software allows seamless communication among your internal teams while giving them a holistic view of any particular client.
Remember to watch out for the potential cost per user of the software before you make a decision.
Last but not the least, your B2B collection software should give your team one single, holistic view of their customers.
This means a core dashboard with customer contact details such as an address, email, and phone number should be a solid feature in the solution that you choose. Ideally, it would also allow for the ability to update the contact details seamlessly.
This core visibility will help your team save time chasing and searching for old phone numbers and the right email addresses.
You may think you need a debt collection management system.. but you may actually need a different type of solution. If your main challenges are more resources when it comes to accounts receivables collections and managing past due invoices, consider collection software like Simplicity Collect or Anytime Collect.
However, if you also need full support over all these processes:
- Automation of business credit checks
- Managing credit risk
- Payment reminders
- Collections management
- Accounts receivable
Consider Resolve. Resolve is a triple threat that acts as a net terms management solution, credit management solution, and an in-house collections team.
Resolve helps B2B manufacturers, distributors, and marketplaces speed up B2B business credit checks and credit assessments through 'quiet' credit checks. This feature, and more, allows them to act as an “AR and credit team” on tap by providing the resources to help businesses with their collections.
B2B collections software is a necessity when you cannot afford more manual resources for accounts receivable and collection management.
The right solution can help you:
- Streamline your collections efforts more effectively
- Reduced risk of bad debts
- Centralize information with greater visibility while keeping track of the status of all your collections efforts
- Collaborate with your team better
- Makes it easier to identify issues
Ultimately, using this type of solution means a reduction in Days Sales Outstanding (DSO), better cash flow and working capital, and improved financial health of your business. And who wouldn’t want that?
Curious to see how Resolve acts as your “collections and credit team on tap”? Learn more about Resolve’s accounts receivable features.