Collections and Account Segmentation

In marketing circles, customer's are sliced and diced in an array of various market segments. We see the segmentation within industry, sub industry,  customer type, sub types (within types),  and geography drilled down even into the postal code.  All this is related to creating an effective marketing approach in reaching out to your customers.

So....shouldn't Accounts Receivable Management segment its A/R portfolio along the same lines? Wouldn't it bring about improved Collection metrics? The answer is . . . YES!  

But segmenting your customers into effective categories (and developing effective collection strategies) requires a couple of things, such as:
 

1. Credit/Collection history allowing you to segment your customers into collection categories
2. A flexible system which allows you to implement a different collection strategy for each customer segment

Of the above, the 2nd point is critical...without a system driving the strategies,  you will only get half way there.

In my experience, segmenting your customers may not require a lot of heavy duty analysis.  Unlike marketing, you don't need to drill down to finite levels...maybe as few as 2 or 3,  based on risk or payment history.  What you will need to know is which segments pay better vs others, then spell out a series of payment steps (i.e Calling..Emailing/Faxing...etc.) separated by contact days.  For example: Day 1 (after due date) Call...Day 3, Call Again,  Day 5..Email/Fax..etc.  Built into these strategies are internal escalations and dispute management categories.

Bringing this all together effectively is where the system comes in.  Without a effective Accounts Receivable Collection Software System,  your vision won't take you far. It will be a good vision....but business is all about execution of those visions.