Find out how you can increase working capital with effective dispute and collection processes
Did you know that up to 40% of your company’s assets could be held in outstanding invoices? Inefficiencies in the invoice-to-cash-cycle can cause a high DSO and quickly lead to liquidity problems, affecting business performance and endangering operational budgets.
The longer your customers take to pay their invoices, the less likely it is that they will make the full payment, especially if the invoice is disputed. Disputes can range from billing errors, delivery delays, pricing errors, product quality and quantities, through to payment problems and returned goods.
And disputes not only increase outstanding balances but could damage your business relations and customer satisfaction levels, increase your administrative workloads, resulting in reduced productivity and an increased risk of being unable to write off bad debt.
Implementing effective dispute and collection strategies will enable your organisation to reduce outstanding DSO, minimise risk of non-payment and increase working capital.
Tips to reduce your DSO
Improving cash flow can often be as simple as making small changes and implementing best practice in your dispute and collection process. Here are some important tips to reduce DSO:
- Make it easy for customers to pay you by offering them different payment methods
- Offer appropriate payment terms based on credit and risk evaluations
- Invoice immediately after delivery
- Complete the invoice with all necessary information and clear payment terms
- Offer incentives for early payments
- Improve your receivables management and follow up activities
- Switch bad payers to pay in advance or let them go.
Collecting receivables quicker can give you more independence from lending sources, generates less delinquencies and improve profits while building customer loyalty. With appropriate in-house dispute and collection tools, you will improve the number of daily productive calls, payment promises, disputes resolved and can achieve DSO and delinquency targets for the month, which can be continually benchmarked with the industry average to measure success.
What software tools are available to help in the DSO process?
There are several tools in the market that can integrate all receivables and related data in a single solution. Best-practice processes can be digitised to effectively manage overdue payments and invoice-based disputes, prioritising and automating escalation with dunning integration. The tools also standardise processes and give access to the same information across all relevant departments, facilitating users with different skills and backgrounds to achieve dispute and collection resolution.
How does SAP Dispute Management work?
SAP Add On solution Dispute Management (formerly DMsprint), part of the SAP Credit Management Suite, seamlessly integrates with your accountancy process to enable a high degree of process automation in real time and facilitate dispute resolution and collection.
Automating accounts receivables
It automates accounts receivables to enable collection files to be assigned to the customer file and responsible clerk when one or more invoices are overdue and sends warnings and update messages automatically when a partial payment or deduction has been completed. Collection and dispute files are automatically closed when overdue amounts are fully cleared and a confirmation message is then sent out to notify the responsible clerk and other authorised users.
Automating dispute cases
Disputed cases are created automatically based on definable rules, such as payment difference reason codes during the FEBAN post process bank statement, or directly by the user when receiving an invoice-based customer complaint or entering a partial payment. With a disputed case the user assignation rule engine allocates each dispute case to the authorised user with a priority status based on configurable rules such as dispute reasons, credit risk categories, dunning areas, customer groups, product lines and postal codes. In the event of a justified dispute, predefined reasons can even set a permanent or temporary dunning block in the SAP dunning process.
Confidence with daily tasks
Each user has a daily task list within the centralised tool. By clicking on each entry, the user directly accesses the related dispute file to take further action. Authorised users also gain access to the whole customer file, status and payment history in definable modular dashboards.
The task list enables the user to know when, who and why to address customers. Dispute and collection files collate all the data from the different departments and dunning process in a single view. Phone conversations, relevant documents and notes can be added to the corresponding file, as well as resubmission dates for next actions such as payment promises. This ensures that the system keeps central track of the collection process.
Enhanced documentation and communication
The tool includes email and document management functions with correspondence templates and is fully integrated within the SAP dunning process. Every clearance and dispute case can also be linked to external systems like SAP-QM or CRM.
Different dispute cases related to the same customer and having similar reasons can be easily merged in one single case to ease dispute resolution and improve customer communication.
The solution can be easily adjusted to reflect dispute changes and in-house collection procedures, such as rules for dispute files creation and supervisor assignations, range of possible activities for resubmission, work lists, and rules for priorities and escalations.
With comprehensive and visual reporting, authorised users can proactively view all disputed cases that are about to exceed resubmission dates. In addition, drill-down functions provide a comprehensive overview of all in-process and closed disputes with reasons, items and amounts cleared, users involved and processing times for internal evaluations. Dispute overviews can also be exported to Microsoft Office and SAP Business Objects for further analysis.
Releasing resources for value add tasks
The Dispute Management tool enables your organisation to improve DSO and working capital as well as make savings on insurance premiums, interest costs and increase customer satisfaction and productivity by releasing resources for other value-added tasks.
It can additionally be used as part of the SAP Credit Management Suite platform in combination with Information Management (formerly CGsprint). This lets users interface with information agencies such as Bisnode/D&B, Creditsafe and CRIF in real time to enable creditworthiness analysis and monitor customers with high levels of disputed outstanding amounts. Risk Management (formerly RMsprint) can be integrated to deliver a complete own payment history overview.
The Dispute Management tool can also be integrated with further software components for external cash collection (formerly CGsprint Inkasso) and ABS Factoring Management (formerly ABSsprint) enabling the easy compilation of accounts receivables in order to outsource collection activities to professional and specialised debt collectors or factoring companies without losing invoice traceability.