Active Collection vs. Passive Collection: Which Is More Effective?

Collecting accounts receivables is often a nightmare. A lot is at stake for your business. Recurring debt settlements ensure a steady cash flow, lower your risk percentage, and add to your profits. Therefore, a lot of time and effort must be devoted to the collection process, and the best way to resolve this is through active collection.

Here we have put active and passive collection processes head to head, to showcase which process is most effective in this field of business and what the future of accounts receivable collection looks like.

Reduce Non-payments and Late Payments with Active Collection

One must always keep in mind that not all customers are the same! Chasing down delinquent customers is not the situation you want to put yourself in. So try to be consistent with your follow-ups and reminders. Nowadays consistent reminding can be made financially feasible by using the right automation technologies.

One of the most common reasons for payments piling up and invoices mounting is insufficient and badly timed communication.

Customers often perceive passive communication and invoicing delays as relaxed payment conditions. This leads to piling up of returns and increases the days sales outstanding (DSO) number. So, engage in active communication to shorten the payment cycle.

Active Accounts Receivable Collection Is More Than Emails

Just emailing the invoices doesn’t always count as active collection. The best alternative is to use calls or messaging for accounts receivable collection, as it ensures the message has been received and the charges are understood. 

At On-Time we help you automate this entire AR collection process with our no-code omnichannel communication solution, which boosts your active collection process. 

Traditional, collection process of manually calling or issuing invoices often results in errors and delays. You may end up sending wrong invoice amounts or mix up other customers with your high priority accounts. Additionally, this task may make you lose sight of other, more pertinent tasks.

The risks are almost endless but the solution is simple. So opt for automated payment collection and never disappear from your customer’s radar. Check out the 5 different benefits of adopting automation in accounts receivable collection.

Active Collection Ensures Effective Customer Service and Engagement

Clear and timely communication is most important when initiating the accounts receivable collection process. It also guarantees that customers are cared for and helps build a better brand experience.

Sometimes customers won’t pay a bill if they don’t understand what, how and when to pay. Also, they might feel unappreciated if you don’t communicate enough with them, and in a way they feel is appropriate.

So engage in active communication even if it is for sending out payment reminders or terms that you have set for your debt collection process – and be proactive!

Follow-ups not only help to educate your customer but it keeps the channel of communication open. It sets a good stage for initiating the final payment process.

Check out this blog for some essential tips on how to improve customer service with automated ARC.

Automation Helps You Avoid Difficult Customer Experiences

Ideally, active collection should start at the beginning of the debt collection cycle. Automated accounts receivable collection processes can help launch this strategy, and the human workforce can focus on harder and high-priority cases that are near the end of the cycle and demand negotiations.

Passive collection will lead to customers not adhering to payment terms and to creating disputes before the deadline. They might claim to be unaware of dates, legal issues, or payment systems.

Use automation powered by robocalling and omnichannel communication systems to solve such discrepancies, and build your customer relations together with trust!

Remember that consistency and active collection is the secret to keeping the finances of your business healthy! Let us support you in this process, and ask for more information by booking a meeting.

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