The purpose of receivables management is to grant and manage credit for customers and to grant payment terms. In doing so, the goal of companies is to keep bad debt losses as low as possible and to secure liquidity. It is often problematic to accurately assess the creditworthiness of the customer and the associated risk of default on receivables payments.
By analyzing economic data, creditworthiness can be better evaluated. Receivables or open payments can be managed in an optimized manner via a data-based dunning system. In this way, (partially) automated debtor approaches, payment reminders, dunning letters, payment plans and repayments are made on a debtor-specific basis. A program is used that handles the process completely electronically from start to finish. This enables cooperative rather than confrontational receivables management. Customer relationships can thus be maintained and receivables quickly repaid.
The U. S. multi-technology company 3M manages its credit risk based on historical write-offs, regional economic data, and historical sales revenue. The analysis of the collected data enables a more accurate calculation of the risk of granting credit to its customers.
Pair Finance, a technology company, offers receivables management as “digital debt collection”, promising to manage outstanding receivables without straining customer relationships. Zalando and Home24 use the services.
Data analyses in receivables management support internal controlling and make processes more efficient. The company’s liquidity and thus its ability to act are secured.
Sources: 3M (2017), Finance Forward (2020)
