This blog was originally published in December 2020 and updated in September 2025, adding updated information on new AI developments in collections automation software.
Let’s be honest: Running a collections team today isn’t what it used to be. Gone are the days when success meant dialing for dollars and sending out generic reminders. Today, collections is about data-driven strategy and customer experience—and if you’re still relying on manual processes, you’re already behind.
Here’s the reality: only 58.9% of U.S. companies get paid on time, and severely overdue payments – those delayed by more than 90 days – have increased by 2.9%. These delays not only hamper performance metrics like Days Sales Outstanding (DSO) but also strain cash flow, forcing companies to hold a substantial amount of cash on hand to float their business during payment gaps. With trends like these manual follow-ups aren’t the answer.
Discover the modern challenges collections teams face and how an AI-automated collections software can solve them.
Top Challenges Facing Collections Teams
Manual Processes and Inefficiency
Collections teams often find themselves overwhelmed by time-consuming, repetitive tasks like sending reminder emails and chasing remittance details. These inefficiencies not only hinder cash flow but also divert attention from high-value, strategic priorities.
Lack of Visibility and Prioritization
Without real-time insights, it’s difficult to identify which accounts are at the highest risk because they lack the data to effectively prioritize their efforts. As a result, outreach strategies address low-risk accounts and low-value overdue invoices with the same level of urgency as high-risk, high-value ones.
Strained Customer Relationships
Disorganized outreach can lead to customer frustrations, especially the longer a payment is outstanding. Buyers are contacted too early or too often and resolving disputes manually across different systems can also delay resolutions, further irritating customers.
“Trends in bad debt haven’t been moving in the right direction. 2025 calls for a stronger command of collections.”
Dave Ruda, VP Product, Billtrust
It’s a lot to deal with. But here are five ways you can run a more effective collections operation in today’s challenging business conditions.
Five Ways to Run a More Effective Collections Operation
1. Automate the Busywork (and Give Your Team Time Back)
Most late payments don’t require a heated phone call – they just need a nudge. But sending those nudges manually can be a time suck.
AI-powered collections automation software changes the game. Imagine this:
- Personalized reminders go out automatically, at the perfect time.
- Collectors’ inboxes organize themselves by easy-to-follow categories like disputes, payment promises, etc.
- Large learning models draft email responses on behalf of your collectors, cutting email handling time from 8 minutes to just 2.5 minutes.
All of this results in a 3.2x productivity boost without adding headcount. Suddenly, your collectors have time to focus on what really matters: resolving disputes and working with the most important clients to build better relationships.
2. Turn AI Insights into Action
Automation is great, but insight is power. AI has evolved beyond automating basic workflows; it’s about providing your team with predictive insights that drive proactive actions. Today’s AI tools excel at exactly that: they can help you foresee problems before they arise.
- Optimize Your Outreach: Take the guesswork out of collections management with Billtrust’s Agentic Procedures. AI agents analyze past buyer payment behavior and leverage that contextual intelligence to recommend what to say, when to say it, and which communication channel is best. The result? Happier customers and more invoices paid on time.
- Sharpen Your Forecasting: AI models work with your historical data to more accurately predict when payments will be made. This allows finance teams to sharpen cash flow forecasting accuracy.
- Lower Your Credit Risk: Get 100% visibility into all your accounts – not just the highest-revenue ones. AI-powered credit agents automatically analyze payment history to redefine risk management and recommend credit limit adjustments, helping you identify and reward your best buyers.
- Drive Higher Results with Precision Performance Metrics: Gone are the days of only relying on DSO – a metric influenced by a wide range of factors – to measure collections performance. Advanced collections automation platforms use the Collections Effectiveness Index (CEI). This metric offers a precision view of how much money was recovered during a specific timeframe, making month-over-month comparisons easier for collections leaders.
3. Ditch the Old Dunning Schedule for a Data-Driven Strategy
Traditional, rigid dunning schedules are no longer effective. A one-size-fits-all approach is inefficient and can alienate customers. Instead, use data to apply the right pressure at the right time:
- Time Your Outreach Perfectly: Our research, based on an analysis of 13 million buyers, shows that reminders are most effective when they start 30 days before the due date. Calls are most impactful the day before or on the due date, when urgency is highest. Get more research-backed tips in the Next-Gen Collections eBook.
- Segment Buyers Intelligently: Moving beyond guesswork means segmenting buyers by risk. Billtrust’s AI-powered engine does this for you, grouping your portfolio into high-, mid-, and low-risk groups and recommending the most effective outreach approach for each.
“No one would you talk to a loyal, low-risk customer the same way they’d talk to a chronically late payer. AI automation makes that level of personalization possible at scale.”
Dave Ruda, VP Product, Billtrust
4. Make Collections a Customer Experience Win
Here’s a truth we don’t talk about enough: Collections is part of the customer experience. Every communication shapes how customers perceive your brand. Plus, the payment interaction is often the last touchpoint, so it can leave a lasting impression that may ultimately make or break the next sale.
When buyers expect digital services, AR teams must move beyond paper invoices and phone calls. Digital-first options like email, texts, and self-service portals allow buyers to review delinquent invoices, see payment status, set up autopay, and manage invoice disputes. Embedded links and one-click also make transactions effortless.
If paying an invoice feels harder than buying from Amazon, the relationship suffers. Fix that, and you’ll not only get paid faster, but you’ll also keep customers happier.
5. Use Collections as Your Frontline Defense
Equipped with built-in intelligence and real-time control, your collections operation can evolve into a powerful first line of defense, protecting revenue while building financial resilience.
- Reduce Bad Debt: Automated follow-ups and earlier customer engagement can have a massive impact. Just ask Peak Industrial, who reduced their bad debt from $500,000 to under $200,000 by using automated follow-ups for earlier customer engagement. Or listen in as 84 Lumber explains how they solved their collections problems.
- Resolve Disputes Faster: Disputes are a common cause of payment delays. A centralized case management system for disputes can accelerate handling and reduce friction for both customers and AR professionals.
With a dedicated system, you can view, filter, and act on disputes, easily loop in the right internal team members, add attachments, and assign tags to ensure cases are tracked accurately and resolved quickly. You can even automatically pause dunning schedules so automated payment reminders aren’t sent to customers who have an open dispute.
Get best practices for invoice and payment disputes, including three steps for effective management
Learn More about Running an Effective Collections Team
With AI tools, finance teams can now take a more strategic approach to collections. They have the technology to determine the highest probability of payment, historical analysis to pinpoint the best time and method to contact buyers, and automation to know how to personalize outreach. This empowers your team to be more effective, transforming them from reactive collectors into proactive revenue drivers.
If you’d like to learn more about how to run a more effective collections team, request a personalized product demo of Billtrust’s AI-powered Collections and Credit solutions today.
