Effective collections management is a cornerstone of financial stability for businesses of all sizes. In today’s global and digital economy, the ability to collect payments on time while maintaining strong customer relationships has never been more critical. Yet, with rising complexities—ranging from regional payment behaviors to increasing customer disputes—organizations must go beyond traditional debt management and collections methods.
This is where accounts receivable automation, advanced debt recovery strategies, and even AI in collections can offer a significant competitive edge. When strategically deployed, these tools and practices help companies reduce DSO (days sales outstanding), improve cash flow, and strengthen the overall financial supply chain management process.
What is collections management?
Collections management refers to the systematic process of ensuring timely payment from customers. It spans from the issuance of invoices to the resolution of disputes and overdue accounts. A robust collections strategy enables businesses to secure cash flow, maintain liquidity, and optimize working capital.
In today’s volatile environment, collections are no longer just about chasing late payments. They involve managing the full credit-to-cash cycle, including coordination with sales, credit, and legal teams. As companies grow and scale globally, the ability to centralize and automate collections becomes essential.
Challenges and obstacles for collections management
Despite best efforts, collections teams often face significant hurdles. Common challenges include:
- Late or missed payments
- Manual processes that are time-consuming and error-prone
- Regional differences in payment culture
- Increasing volume of customer payment disputes
According to Euler Hermes, 78% of countries display a poor payment culture, and 54% of companies struggle with excessive DSO. These statistics highlight the urgent need for automation and standardized best practices in collections management.
The role of collections management in DSO and accounts receivable
Collections directly impact a company’s DSO, a key metric that measures how quickly a company collects revenue after a sale. Long DSO cycles can choke cash flow and impair investment capability.
At the heart of this equation is the accounts receivable process, which includes everything from invoice creation to cash application. Optimizing collections means optimizing AR.
What is DSO?
DSO (Days Sales Outstanding) refers to the average number of days it takes for a company to collect payment after a sale has been made. A high DSO indicates delays in payment, which ties up capital and affects liquidity.
Read more about DSO reduction strategies.
What is accounts receivable?
Accounts receivable (AR) is the outstanding money owed to a business for its goods or services. Effective accounts receivable automation helps organizations streamline cash inflow, reduce risk, and manage payment schedules with greater accuracy and transparency.
How can DSO optimization improve accounts receivable?
By focusing on DSO reduction, companies can make their AR process more efficient. However, challenges like fragmented data, manual entry, and resource constraints can stall progress. This is where automation of accounts receivable offers immense benefits, cutting processing time and reducing errors.
Learn how to modernize your AR operations with this eBook.
The role of dispute management in collections
No collection strategy is complete without an effective dispute resolution process. Disputes can delay payments, disrupt customer relationships, and inflate DSO if not resolved swiftly.
What is dispute management?
Dispute management refers to the process of handling and resolving customer issues related to invoices or payments. Common causes include:
- Incorrect billing
- Product or service dissatisfaction
- Miscommunication between departments
These disputes directly affect revenue recognition and AR efficiency. Explore Serrala’s collections and dispute solutions to learn more.
Strategies for resolving disputes
Companies can improve outcomes by:
- Creating standardized workflows
- Using automation to track and escalate disputes
- Balancing global standards with local expectations
- Training staff in customer engagement and resolution skills
How do debt recovery strategies improve collections?
Combining debt recovery strategies with dispute resolution allows companies to tackle both ends of the payment delay spectrum. Tactics include:
- Clear terms and conditions
- Flexible payment plans
- Multi-channel communication
- Prioritizing aging receivables
- Personalized follow-ups
- Early payment discounts or incentives
Read this blog on external debt collection for more insights.
What are the complexities with global collections?
Global collections come with unique complications, including currency fluctuations, time zone differences, and cultural variances in payment behavior.
The Euler Hermes Collection Complexity Score highlights that countries like the UAE, Russia, and China pose significant challenges due to legal frameworks and local practices. These differences necessitate a flexible and regionally informed collections approach.
How can shared service centers solve complexity?
Shared service centers (SSCs) offer a solution by centralizing AR activities, especially for multinational corporations. Benefits of financial shared service centers include:
- Standardization of policies and procedures
- Cost-effectiveness through economies of scale
- Better control over operational risk
However, companies must still accommodate local payment behaviors and regulatory differences to ensure success.
How can collections be improved through technology?
Advanced software and AI in digital collections can streamline operations, reduce manual labor, and provide predictive insights for AR teams.
AI in collections
AI in collections offers:
- Intelligent prioritization through collections scoring
- Faster dispute resolution
- Personalized payment reminders
- Machine learning to forecast delinquency
Accounts receivable automation
Cloud-native tools like Alevate AR enable seamless accounts receivable process automation by:
- Integrating with ERP systems
- Auto-generating invoices and reminders
- Providing real-time insights
Explore how Serrala transforms AR in this whitepaper.
SAP-embedded collections management software
Tools like FS² Collections, embedded in SAP and S/4HANA ready, combine the best of AI and automation. Benefits include:
- Real-time DSO tracking
- Workflow automation
- Optimized working capital
- Centralized data for global operations
Discover how FS² Collections for SAP brings intelligent collections into your ERP landscape.
Why using Serrala’s collections solutions can elevate your collections process
In a dynamic financial environment, success depends on adaptability. Effective collections and dispute management are no longer optional—they are strategic imperatives.
Serrala’s intelligent collections solutions, like Alevate AR and FS² Collections, empower businesses to:
- Reduce DSO through automation and prioritization
- Handle customer payment disputes with consistency and speed
- Navigate global collections complexity using centralized, scalable platforms
- Enhance financial supply chain management and working capital performance
From collections management to dispute workflows and AI in collections, Serrala offers an end-to-end solution to meet the demands of modern finance.
Download our whitepaper on global collections complexity to learn more.
Want to transform your collections process?
Visit our Collections & Disputes page to discover how Serrala can help you stay ahead.
