Is the debt collection a drag? It doesn't have to be!

The overdue sales invoices in your accounts receivables can make you grimace. Collecting late payments is a task that most companies embark on hesitantly, and would rather sweep under the carpet. By changing your perspective and making debt collection a seamless part of your efficient order-to-cash cycle, you will see a lot more happy faces, both in your company – and in your customer companies, too.

Operations Manager Raine Westerholm from OpusCapita Solutions urges organizations to shake off the negative attributes concerning debt collection.

“The challenges companies are experiencing are usually caused when the handling of late payments and collection of overdue receivables are seen as a separate function, even a sort of necessary evil at the end of the order-to-cash (O2C) chain. The general opinion of collection as an activity is often quite harsh, which adds to the companies’ reluctance to engage in it.”

Westerholm emphasizes that an efficient O2C process is not a one-way arrow from order to cash. Instead, the various phases of the cycle should interact, and they should be looked at comprehensively, including the debt collection. This allows an integrated and proactive approach to sales receivables management, and makes it easy for all the functions involved – marketing and sales, invoicing, accounts receivable (AR) ledger as well as customer service and debt collection – to cooperate.

“This leads to fewer late payments to begin with. And most importantly, it enables the end customer’s experience to be taken into account constantly throughout the cycle,” Westerholm says.


To this end, OpusCapita combined its experience in invoicing, and cash and receivables management with an acclaimed, customer-oriented collection services model developed by Kredithanterarna, a Swedish company that merged with OpusCapita in 2015.

“Usually the data concerning the outstanding receivables is fragmented into several databases in different parts of the process, and it is hard to gain visibility to utilize it for decisions and in customer service. With one provider and one integrated database, information is always synchronized.”

Gathering and analyzing the data from internal and external sources is the key to improving the incoming cash flows. For instance, information on the payment behavior of the customers can be monitored from the AR ledger and used to redirect the activities in sales.

“The first actions for ensuring that the sales invoices are paid on time are made before the order is even in, by creating solid credit policies and continually developing them, and making sure the contracts are well-written and unambiguous.”

Westerholm points out that quite often the reason why a payment is late is that the customers don’t understand the invoice they have received. Eliminating manual steps from processing orders and deliveries, for instance, improves the information on the invoice, and automation in reconciliation helps to avoid errors and unfounded claims in the sales ledger.

“The administrative effectiveness and quality of your invoicing processes cuts out unnecessary delays. In addition, regularity helps your customers to forecast their liquidity needs, and meet the due dates.”

The majority of invoices get paid one day before and three days after the maturity date. Knowing this, the accounts receivables department should take immediate actions. There is no need to belittle the meaning of late payment for the sake of customer satisfaction.

“On the contrary, approaching the customer via email or phone, for instance, soon after the due date and before any actual reminders, communicates your willingness to solve the issue in a customer-friendly manner, but also shows determination. It will strengthen your company’s profile more than just ignoring the overdue receivable at first would do,” Westerholm states.


The data-driven approach enables creating customer segments according to company policies, and targeted communications and clear processes to meet the individual needs and situations of different segments, industries, or even individual key customers.

“Even when you are dealing with unpaid invoices, the customer relationship should not get damaged in the process. Analyzing the history, the potential for new sales, and the reasons for the overdue payment will help to determine the actions to be taken – you might want to react differently to your long-term customer’s temporary liquidity squeeze, for example,” says Raine Westerholm.

“But at the end of the day, although we are talking a lot about the end customer’s satisfaction, the most important goal is to turn our customer’s uncertain receivables into cash on hand. Targeted communications actually increase the effectiveness of collecting the receivables.”

Debt collection is regulated by local, country-specific laws, but Westerholm points out that there is still room for optimizing and personalizing the process. The systematic approach that is based on data integration and automation makes it possible to expand the best practices from market to market, while still considering local culture and habits.

››› Published in OpusCapita Journal 2/2016. Read the whole magazine here.