You can reduce your collection agency costs by automating and strategizing accounts based on dollar amounts. An efficient collection team is just as effective as a large average team, but costs less. Small, highly-efficient teams maximize the money you spend on salaries and incentives. And they can increase collections and decrease operational expenses at the same time. Read on for more information on how to make your collections team more effective. We’ll talk about how to automate this process.
Automate the process
Many health systems have experienced cash flow problems due to the recent pandemic, creating intense pressure on financial leaders to improve revenue cycle efficiency and lower cost-to-collect. To learn more about revenue cycle automation, consider the strategies presented at a recent AKASA workshop. In addition to Becker, the discussion featured AKASA executives Ben Beadle-Ryby, senior vice president of sales, and Amy Raymond, vice president of revenue cycle operations.
Automation frees up workers from mundane, low-value tasks, generating cost savings. Additionally, automation increases transparency and efficiency of processes, reducing bottlenecks and boosting employee and interdepartmental communication. Automated systems also eliminate errors, saving businesses money in the long run. By reducing labor costs, automation allows business owners to focus more time on core competencies and revenue-generating tasks. Businesses can even automate processes to increase collections and cut operational expenses by up to 30%.
The advantages of automated accounts receivable management go far beyond increasing collections. Automated systems ensure timely payment and reduce the risk of bad debts. Automated collection emails and payment reminders make collection on time a breeze, and most automation solutions offer interactive analytical dashboards. This means the business owner can track and review data from anywhere. If the business owner is unsure about whether automation is the right solution for them, consult with an MSP and implement a trial version.
Automation of the O2C process allows businesses to avoid bottlenecks and ensure accurate cash flow. By eliminating human error and introducing automation into business processes, businesses can go paper-free and incur lower operational expenses. Automation can also help improve customer satisfaction and brand perception, as automated systems adhere to standardized procedures and eliminate human errors. The cost-savings realized from automated AR processes can pay for the investment in a matter of months.
Stratify accounts between high- and low-dollar amounts
In the quest to maximize collection dollars, it can be helpful to stratify accounts between high-dollar and low-dollar amounts. This practice will help you to increase the returns from your collection efforts and save on operational expenses. It is important to know that low-dollar unpaid invoices will cost you less to collect, but they will consume more time and effort. Stratifying accounts by high-dollar and low-dollar amount will help you to determine which accounts to focus on.
Reduce the need for collection agencies
When it comes to unpaid debt, one of the fallback plans for businesses is collection agencies. These companies don’t work for free, and their fees are typically 20-40% of your total expenses. The best way to reduce your collection expenses is to avoid the use of these agencies altogether. Whether you decide to use skip tracing or hire a collection agency, there are many ways to reduce their costs.
The most common operating expenses are associated with employees. These include salaries and incentives for collection staff. The more people involved in a collection process, the more you pay. In the case of collection agencies, more employees means higher operational costs. Therefore, it’s best to reduce these costs by employing fewer people. By reducing the number of employees, you can cut down on operational costs while retaining the quality of your service.
In order to reduce the need for collection agencies, credit departments should analyze their customers’ financial statements. Credit departments can hire internal debt collectors or hire an agency. However, if your company’s accounts receivable collection department has a limited staff, it may be more effective to use a collection agency. These firms will perform better than in-house debt collectors. In addition, these agencies generally operate on a contingency fee basis, which means you pay them only when you actually collect the debt.
Moreover, the current cost-recovery method does not reward efficiency in collection activities. As a result, the more resources you use to collect debt, the less revenue you’ll be able to distribute to the governments. In addition, the more resources you spend on collections, the less money you’ll have left to distribute to other government departments. That’s why more collection agencies are likely to lose money.
Focus on a well-thought-out process for billing and collecting invoices
A strategic accounts payable posture focuses on optimizing collections while maintaining relationships with suppliers. Developing relationships with your clients’ accounting departments helps you avoid many of the pitfalls associated with AR. By creating a relationship with your clients’ accounting staff, you can ensure that your project invoices look professional and are paid promptly. Though calling clients seven days after you send them an invoice may not be feasible for every client, it’s important to schedule a call with slow paying clients or those that overspend. In addition to collecting payment, this approach helps you get the client’s agreement to accept or decline your invoice.
Ideally, the billing and collection process should be well-documented and follow a standardized methodology. For instance, a documented process should include a monthly calendar to determine when billing reports should be sent to project managers and when they should be edited. An efficient process should be able to achieve these goals in five days or less. In addition to increasing collections, a systematic billing and collection process can help reduce operational expenses.
Regardless of the size of your business, you can save a considerable amount of money by focusing on a well-thought-out billing and collection process. While it can seem overwhelming, an efficient, automated billing and collections process can help you save money and increase collections. This process is made easier by using templates and automatic invoicing software.
For increased visibility, a well-thought-out billing and collection process can help companies maximize flexibility and lower operational costs. By streamlining payment processes and focusing on collaboration, a well-designed invoice collection process can help you reach new customers faster and save money. It also allows companies to make a stronger impression on their suppliers. Further, a well-thought-out process for billing and collecting invoices will improve overall customer satisfaction.
Time tracking is crucial to sending accurate invoices. Accurate billing processes help maximize revenue by justifying out-of-scope work and billing extra services. Time entry will eliminate excuses for late payment and cut down billing cycle. And daily time entry will help you manage your time and improve invoice accuracy. Ultimately, you’ll enjoy higher collections and lower operational expenses.
