As of April 2024, the US has a total debt of around 34.62 Trillion dollars, with commercial debt being a significant contributor. Such reports have made businesses across multiple industries focus more on ways to maximize their recovery potential in commercial collections.
Source: Freepik
When it comes to boosting commercial debt collection, recent advancements in the debt recovery industry have enabled businesses to streamline their collections while focusing on their core responsibilities. Stable commercial collection is crucial for companies to maintain, as their financial health can significantly impact their cash flows and ability to implement debt recovery. Some of the trends used by businesses to carry out their commercial collections include advanced AI tools, debt predictive models, customer assessments to name a few.
Utilizing AI and Automation for Commercial Collections
AI and automation have been around for a while, with major industries already implementing them in their workflow operations. The same is the case for commercial collections, as streamlining your operations with automation and AI can boost your business cashflows by 45%.
Through the advent of AI and automation, businesses have managed to replace many of their manual tasks with cost-efficient automated workflows that have allowed them to achieve better results without expending more resources. Combined with AI’s machine learning capabilities, companies can foster better customer relations through proactive debt recovery solutions. Here are some ways how AI can boost your debt collection.
Automated Communication
With the advent of AI and automation in commercial collections, companies have been enabled to provide proactive debt recovery solutions and faster responses through automated communication channels such as AI chatbots, virtual assistants, customized customer messages, and regular payment reminders. Such efforts allow for consistent customer communication, further encouraging them to clear the debt early in commercial collections.
Fraud Detection
Cyber-attacks and data breach cases have been on an upward trajectory recently, with many authorities enforcing data and privacy regulations for advanced security in commercial collections.
Among such practices, the use of AI and automation can enable companies to further enhance their security protocols by detecting anomalies, real-time data monitoring, identity verification, and consumer analytics. Furthermore, the integration of AI and automation in the workflow for commercial collections has now made advanced practices such as blockchain integration and natural language processing (NLP) possible.
Source: Freepik
Regulation Compliance
For better-optimized commercial collections, the relative authorities have implemented several debt recovery regulations that pay special attention to both consumer and commercial rights. While companies are enforcing regulation compliance in their recovery operations for commercial collections, AI has made the task easier through RegTech.
RegTech, also known as regulatory technology, gathers data from multiple departments and sectors in a company to identify patterns and consumer behavior. Then, through advanced analytics, it implements rule-based systems according to the regulations, which in turn helps businesses detect any regulatory violations or unauthorized practices in commercial collections.
Enhanced Data-Driven Decision Making
Data driven decision making (DDDM) in commercial collections can help businesses to improve their recovery rates and improve their operation efficiency by using data analytics for personalized recovery approaches, risk assessment and pattern recognition withing multiple data sets in commercial collections.
Reduced Human Error
In any manual task done within an organization for optimized commercial collections, human error can lead to further challenges in commercial collections. To avoid such hindrances, businesses can replace their manual tasks with automated operations to reduce the probability of human error through automated data entry and real-time error detection, which further emphasize the importance of automation in debt collection to streamline recovery efforts for better commercial collections.
Source: Freepik
Customer Segmentation in Commercial Debt Collection
When dealing with commercial collections at larger scales, it can be difficult for businesses to evaluate which AR needs to be targeted first to carry out efficient commercial collections. Such efforts can be further optimized through customer segmentation, which involves grouping customers based on their transaction history, pending invoices, or many other factors in commercial collections.
Customer segmentation also enables companies to provide their customers with custom-tailored solutions for faster commercial collections. Reports suggest that customer segmentation can boost revenues by 10% to 15% for businesses. Such practices help companies foster positive customer relations through user-friendly debt recovery experiences in commercial debt collection.
How To Use Predictive Models in Commercial Collections
What if we told you that technological advancements can allow you to predict debt before it even happens? The statement would almost seem fantasy-like at first, but the current predictive analytic techniques have led to the foundation of debt predictive models that can highlight which debt needs to be collected first and what customers require extra effort in commercial collections, as around 60% of companies use such analytics for further process and cost efficiency. To enhance your commercial collections, here are some types of debt predictive models being used by businesses around the world:
- Recovery Rate Models
- Segmentation Models
- Probability of Default (PD) Models
- Behavior Scoring Models
Why Credit Risk Assessment is Important in Commercial Debt Collection
Customer assessment can help businesses get a better picture of commercial collections to evaluate their recovery potential when looking for the best credit collection services for commercial debt recovery. Customer assessment can be done on various factors such as previous payment history, owned assets, debt amount, and much more. Credit risk assessment provides the most insights among such factors, as around 542.6 million credit accounts were reported to exist by 2023 in the US alone. Such a diverse data set can provide businesses with vital information to assess debt risk beforehand in commercial collections. Here are some avenues through which companies can navigate high-risk accounts in commercial collections.
- Early Risk Identification
- Prioritized Segmentation
- Mitigate the Risk of Bad Debt
- Better Customer Relationships
- Negotiations and Settlements
Incentivize Early Payments to Enhance Your Recovery Potential
Early Payment incentives have been around for a while across multiple industries, yet their implementation in commercial collections needs careful assessment. Companies facing financial losses can further damage their financial health if such incentives are not implemented correctly.
Incentivizing early payments can encourage customers to clear their debts early in commercial collections, especially when evaluating strategies to deal with bad debt. Here are some ways you can incentivize early payments for your commercial collections.
- Discounts – Discounts can be a great starting point for encouraging customers to clear their pending invoices early within a given time frame.
- Flexible Payment Plans – Offer flexible payment plans to customers according to their financial conditions to foster positive relations and motivate them to pay early.
- Waived Interest Fee – Businesses can waive interest fees or even penalties on outstanding payments for customers who clear their pending debts early in commercial collections.
- Loyalty Rewards—To build long–term relations with your customers, loyalty rewards can further compel them to keep up with their payments.
While convincing customers to clear their debts early may seem like a walk in the park, the fast-paced and high AR value market in commercial collections makes the task more complicated; that’s why CollectCO, the industry-leading recovery platform for businesses, can boost your commercial collections without the risk of bad debt through its user-centric approach. Contact CollectCo today to maximize your recovery potential in commercial collections.