How AI will transform the ability to collect business debt

Artificial intelligence (AI) holds tremendous promise for creditors who want to reduce the impact of bad debt on cash flow and profitability. Already, AI is helping B2C lenders predict which customers are likeliest to fall behind and design strategies to quickly resolve past-due amounts.

Because AI solutions learn as they absorb and analyze customer behavior, these ultrasmart systems will only become more powerful with time, streamlining customer communications and reducing billing and collections costs.

1. Predictive intelligence identifies credit risks early

AI-driven systems have the power to analyze years of customer payment experience, creating models that predict collection risks much more precisely than our current methods. Imagine being able to assess a new customer’s creditworthiness without relying solely on credit bureau reports and business references, which for many businesses is a slow, manual process. In this scenario, an AI-driven system pulls in these basics but also compares the new client with existing clients who have established credit and payment histories with your company. This gives you a more informed risk profile for this new client, enabling you to tailor credit terms to risk and reward selected customers with improved terms as they earn them.

Over time, AI-generated models will learn more about payment behaviors, offering intelligence you can share with your sales team. This makes default prevention part of your new business strategy, with everyone working together to attract, serve, and retain the most profitable clients.

2. Streamlined communications to engage clients and save time

In an AI-powered world, clients who fail to pay on time receive immediate reminders through multiple digital channels. The content of each message is carefully calibrated to the seriousness of the situation, based in part on the client’s risk profile and other accounts receivable metrics.

These messages are a more efficient way to do what every well-run company already does: affirm that they value the client’s business and seek to quickly resolve payment issues.

3. Client-friendly channels open productive conversations

Online chat has proven its value in B2C customer care, emerging as an efficient way to handle questions and concerns. In addition to offering them instant access to current balances, past-due amounts, and billing statement details, chat can give them a way to request custom help in setting up an alternate payment plan.

4. Continuous learning makes outreach more effective over time

With AI driving the client communication process, messages are automated and timely but they never have to be robotic. You determine the exact content and tone of the message and which avenues for resolving the past-due amount you offer. AI continuously monitors client responses, showing the message content, tone, and timing that works best in clearing up overdue balances. Essentially, your collection efforts get smarter and more efficient over time.

5. Detailed client histories on demand

As anyone involved in B2B collections knows, some clients will not respond to multiple rounds of collection messages, no matter how persuasive and well-timed they are. Most of these clients are in serious financial trouble and cannot pay what they owe, so quick action is needed. But at present, generating reports to inform decision-making can be slow, repetitive work.

AI-powered systems can aggregate and deliver this data instantly so that generating reports is more like doing research on ChatGPT. Billing and financial teams can look at the history of a single problem client or groups of high-risk clients, using the insights they glean to make timely, strategic decisions.

6. Rapid escalation to minimize losses and maximize financial health

Escalating sooner has always been the key to recovering the greatest share of business debt since it puts you ahead of the curve in a situation where hordes of creditors are chasing a delinquent client for payment. AI insights will help you decide what to do when — up to and including hiring a collections firm to handle the worst cases for you.

In short, AI promises to move business creditors out of the reactive position they’ve been in far too long, enabling them to forecast risks and map out agile ways of resolving issues at every point in the billing and collections workflow. With AI on your side, you will build stronger relationships with good clients who experience temporary payment problems, who will appreciate the trust you placed in them, and who refer other good clients to you. You will also benefit from seeing fewer clients end up in full default, reducing overall collections costs and boosting your bottom line.

Adapted from: “How AI Will Transform the Ability to Collect Business Debt”, by Dean Kaplan, president of The Kaplan Group, a commercial collection agency specializing in large claims and international transactions, published on CFO News on 23 May 2023.