Collection of Accounts Receivable
dlc successfully manage pre and post charge off outsourced collection projects on behalf of a number of clients, including: the management of customer contact, query resolution, and timely cash collections. Customer retention and satisfaction is assured by applying our clients business values and operating standards during dlc’s delivery of this service.
dlc’s receivable services
dlc’s accounts receivable collection service allows creditors to fully outsource the credit control function, or to challenge the performance of in-house operators. Key elements of this service include:
- Customer Contact – dlc’s receivables collections team will make contact with each customer to manage the relationship and ensure a smooth running from the beginning to end of the process.
- Copy invoices/documentation – dlc can manage administration of invoice and document requests.
- Query resolution – Customers queries can be managed through dlc’s operational centre, ensuring resolution of queries before invoice due date so not to affect payment and ensure high levels of customer satisfaction.
- Applying unallocated cash – Application of payments received allocated against relevant invoices can be managed to ensure that the sales ledger is accurate.
- Timely collections – dlc maintains regular contact and customer management to ensure invoices are paid in a timely manner to reduce the risk of bad debt to your business.
Delivering receivable solutions
Outsourcing your Accounts Receivables (A/R) can help to maximise your sales ledger by pro-actively managing the A/R process to ensure that your customers are paying on time. dlc provide credit control for many well-known brands with the capability to run client functions through our specialised credit management solutions.
Outsourcing Service Performance Measures
dlc can apply a number of service performance measures to demonstrate operational effectiveness. These can include a mix of quantitative and qualitative scorecards tailored to your business requirements. Common measures of financial performance when looking at the accounts receivable ledger include:
Measurement of Days Sales Outstanding (DSO)show
DSO is a measure of the average length of time, in days, that it takes for a creditor to collect payment on their receivables. The lower the DSO, the faster the business is turning sales into payment on their accounts receivable ledger.
The quick method of calculating DSO is shown in the formula below:
DSO should be considered as a measure of the sales to collection cycle, as opposed to simply being a measure of collections performance. The reason for this is that seasonal changes in sales or other elements beyond the control of the collections department such as the extension of credit terms will have an impact on DSO.
When providing accounts receivables services to clients, dlc is able to provide useful feedback and insight to help improve the full sales to cash cycle and deliver improvements in DSO.
Reducing Roll Rates / Improving Cure Ratesshow
Roll rate is the rate at which accounts from one stage of delinquency “roll” into a later stage of delinquency. These stages of delinquency are often referred to as “buckets” or “pots” and are measured in 30 day increments.
Through the use of data analytics and customised recoveries strategies, dlc will minimise roll rates through stabilising customer delinquency levels. The ultimate level of success that dlc can deliver in this regard is to improve cure rates (the rate at which customers are rehabilitated to performing account status). In doing so, dlc is able to reduce our clients’ bad debt provisions, thus improving profitability.
Improving the Liquidation Rateshow
Liquidation rate is a simple calculation used to assess the percentage of cash that has been collected on a batch of accounts. A batch of accounts is typically made up of a month’s worth of invoices, or debt.
This calculation can assist with cash flow forecasting. To achieve this, you calculate the liquidation rate at various points of ageing of each batch of debt – typically this is assessed every month. In doing so, you are able to plot the speed at which cash is recovered, therefore establishing the liquidation curve.
The goal of any good receivables collections department is to increase the speed at which cash is collected, whilst improving the overall liquidation rate. As such, this is a key metric that we apply when providing our clients with our outsourced accounts receivable collections service.
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