How automating the dunning process can keep cash flowing

Has following up on overdue and unpaid invoices become a major impost for your finance team?

Unfortunately, in today’s times, it’s becoming an ever-more common issue, for Australian businesses of all stripes and sizes.

Tough economic conditions – higher interest rates, rapidly increased outgoings and reduced discretionary demand from consumers battling the long running cost-of-living crisis – are making it harder than it’s ever been for local enterprises to turn a profit.

CreditorWatch’s September 2024 Business Risk Index results showed overdue B2B payments were at their highest rate since March 2021, as more enterprises struggled to meet their obligations.

Late payments were most prevalent in the information, media and telecoms sector, at 5.9 per cent, while construction and hospitality registered the highest payment default rates at 1.77 and 1.67 per cent respectively.

Bottom line? Many businesses remain under considerable cash flow pressure, according to CreditorWatch CEO Patrick Coghlan.

‘Ongoing economic impacts such as weaker consumer demand are clearly bringing more pressure to bear on Australian businesses,’ he noted upon release of the report.

Speeding up the flow of funds

In this challenging commercial setting, it’s all too easy for a vicious circle to ensue; one in which your debtors’ cash flow woes all too quickly become your own.

Implementing a strict collections regime can help to keep the funds flowing in, albeit, perhaps, more slowly than you’d like in some instances.

Most established businesses already take a structured approach to dunning, the seventeenth century term that’s still used to describe the process of communicating methodically with customers to collect money owing for goods and services provided.

Typically, it will commence with a gentle payment reminder, followed by more assertive letters and phone calls, if a remittance isn’t forthcoming. Seriously delinquent payers and those who owe significant sums may eventually be referred to a collections agency, if the accounts receivable department’s efforts to secure payment prove fruitless.

Counting the cost of manual collections

Having an employee or several working the phones, firing off emails and generating late payment reminders can be arduous and inefficient, for businesses operating in manual mode.

Using spreadsheets and other legacy tools to monitor and manage late payers is time consuming and expensive.

Enlisting expert assistance isn’t cheap either: here in Australia, businesses can expect to pay a commission of between five and 30 per cent of the value of the debt, should it be referred to an external collection service.

Tools to make the task easy

Embrace dunning automation and the outlook is much brighter.

With the right cloud-based collection and debt management platform in place – one that combines invoicing, smart dunning, collections and payment processing in a single automated solution – you’ll be able to implement a customised dunning process that suits the needs of your business.

Ideally, it will have the capacity to send payment reminders, track payment commitments and notify your accounts receivable team automatically if payment isn’t made.

Deploying this technology can reduce days sales outstanding by 32% within a year of dunning according to BillingPlatform research.

You should also have the option to limit your losses and protect your cash flow by suspending customers’ accounts automatically when payments become overdue.

Choose the right platform and you’ll be able to track customer and billing metrics in a weekly dunning report which shows whether your processes are working and how they might be improved. Armed with these insights, you’ll be able to modify your interactions with customers to ensure they’re as efficient and effective as possible.

Setting your business up for a stronger future in FY2026

Tough times look set to continue in the upcoming financial year and businesses that aren’t assiduous about chasing up overdue payments may all too easily find themselves facing a cash flow crunch of their own.

Automated dunning and collections technology makes pursuing overdue accounts a more efficient and effective proposition, even for businesses with a large volume of low value debts on their books.

If you’re committed to protecting your bottom line in FY2026, it’s mission critical technology that’s likely to pay for itself many times over.

Carl Warwick, regional sales director, Asia Pacific and Japan, BillingPlatform