What is credit and collections management?
Understanding credit and collections management—and how to streamline it with digital tools—is key to making your workflow faster and easier.
If you’re still relying on manual accounting processes, it’s likely costing you both time and efficiency. Many accounting teams still use outdated tools like email and spreadsheets to manage outstanding invoices and cash flow. While IT, sales, and HR departments have adopted automation, many finance teams still use software from decades ago.
In a typical workflow, invoices are sent as PDFs, updated in spreadsheets, and passed back and forth by email. This process leads to scattered, static information that’s difficult to track and update in real time.
There’s a better way to manage accounts receivable (AR). Credit and Collections Management (CCM) is an integrated tool designed to simplify your AR processes. It works alongside your existing accounting system to support credit management, billing, invoicing, payment processing, dispute resolution, and collections. In short, it helps you stay on top of your receivables while giving you better reporting and insights.
Importance of credit and collections management system functionality
Not all CCM solutions are created equal, but most of them support six key areas:
1. Credit facilitation
Manage credit scoring, credit application reviews, financial analysis, and credit limits easily. CCM tools help you assess risk, monitor your AR portfolio, and make informed decisions about new accounts and orders.
2. Billing and invoicing
Avoid errors and speed up invoice generation and delivery. CCM systems support vendor compliance, contract management, and Electronic Invoice Presentment and Payment (EIPP/EBPP).
3. Remittance processing
Simplify payments with financial EDI, EFT, and automated cash application tools. You can match payments to invoices faster and gain visibility into cash forecasting.
4. Collections management
Automate collection workflows, prioritize tasks and keep track of every customer interaction. Features include reminder systems, activity logs, communication tools, and payment plan calculators.
5. Dispute management
Handle deductions, chargebacks, and disputes efficiently with built-in collaboration tools, document sharing, and root cause analysis features.
6. Reporting and analysis
Access dashboards, email alerts, pre-built reports, and forecasting tools to stay on top of your AR performance and make data-driven decisions.
Why credit and collections management is essential
According to Suzanne Sabharwa, accounts receivable are often a business’s most valuable asset. Most ERP and accounting platforms include AR modules, but many fail to manage collections and disputes effectively.
That’s where CCM comes in.
Across industries, companies face challenges in collecting payments on time. In fact:
- 17% of business customers don’t follow supplier credit terms.
- 61% of companies experience delayed or denied payments due to admin issues like incorrect invoices or late delivery.
Industries hit hardest by uncollectable receivables include:
- Manufacturing.
- Specialty trade contractors.
- Business services.
- Engineering services.
- Wholesale distribution.
Companies can boost efficiency and reduce costly errors by automating AR workflows and formalizing collections processes. In fact, senior finance leaders say their top reasons for automation are better control over cash and fewer processing mistakes.
The benefits of CCM solutions
With a CCM application, your business can:
- Lower transaction costs.
- Improve cash flow and forecasting.
- Boost team productivity.
- Reduce bad debt and write-offs.
And the results speak for themselves. Companies that automate collections alone see:
- 20%+ reduction in days sales outstanding (DSO).
- 25%+ reduction in past due receivables.
- 15%+ decrease in bad debt reserves.
Managing modern finance in a time of unprecedented change
Discover how taking the right steps to modernise accounting management systems will help your business gain insights that will lead to improved productivity and reduced costs, and prepare you for rapid growth.
Streamline AR with automation
Sage helps leading finance teams work smarter by automating key processes and eliminating cash flow leaks caused by manual workflows. Our solutions keep your books aligned across B2B partnerships and make managing collections easier and more efficient.
Whether you’re a small business or a large enterprise, Sage’s powerful accounting and AR automation tools can help you take control of your receivables.
Get started with Sage today!
See how our accounts receivable automation software can strengthen your payment strategy and reduce your DSO by up to 30%.
