In the late 1990s, CompUSA Inc., one of the nation's top computer retailers, started to see substantial growth in its commercial accounts and, with it, substantial growth in past-due invoices. After struggling for several years with chasing down the delinquents and bulking up its collections department with an additional 83 people to do it, CompUSA finally went live with collection and dispute resolution software from GetPaid Corp. Within six months, its past-due dollars dropped to $2 million from $8 million, its Days Sales Outstanding (DSO)
fell to 46 from 52 and its collections staff was making 10 times as many customer calls a day. "It cues up faxes, letters, e-mails and phone calls, which allows us to contact every customer for every invoice," says Patrick Fitzgerald, CompUSA's senior director of corporate services. "That was something we just weren't able to do manually."
CompUSA recouped its initial investment within six months and has reduced its collections staff by 39% since adopting the software, Fitzgerald notes. Collecting cash faster has helped CompUSA borrow less, get more favorable bank loan terms when it does borrow and reduce bad-debt write-offs. And while the system has saved the company "several million dollars" in costs, it also has proved to be a plus for customers. "It makes our customers happier because they aren't getting calls six months after an invoice goes past due," Fitzgerald says.
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Many companies want to make better use of their working capital in today's difficult economy. The faster cash comes in, the more time it spends working for the company. Vendors like GetPaid, I-many Inc. and others provide software that sorts out which accounts owe the most, which bills have been due longest and which customers have broken promises to pay. That helps direct the work of collection staffers, determining whether they use letters, faxes or phone calls. (See chart below.)
CompUSA's experience is not unique. John Van Decker, an analyst with Stamford, Conn.-based Meta Group, says companies typically see a 10% to 20% reduction in DSOs and a 20% reduction in collection staff within six months of implementation. Both Van Decker and David Schmidt, principal of A2 Resources, a Yardley, Pa.-based consulting firm, expect the Sarbanes-Oxley Act to create more demand for collections software because it gives companies a more accurate picture of their receivables. "If [companies] are having problems collecting, or they've got a large amount of disputes on their books, they are going to have to start admitting to that," Schmidt says.
Dianna Piumelli, president and CEO of Parsippany, N.J.-based GetPaid, says its software separates receivables that can be paid quickly from those in dispute. "You are able to bring the cash in faster on the piece that is collectible and then you can escalate what happens with the dispute," she notes.
Jan Shaw, assistant controller at Coca-Cola Bottling Co. Consolidated, says the custom software that C/Lect developed for it helped it reduce DSOs by about five days and allows its collectors to track accounts without rooting through stacks of paper. "If someone says 'I'm putting the check in the mail today,' they can flag it for seven to 10 days, based on mailing time, to pop back up on their screen," Shaw says.
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COLLECTIONS SOFTWARE
C/Lect Consulting Inc., Chicago, Ill.
www.clect.net
Credit & Management Systems Inc. Lake Bluff, Ill.
www.icmsglobal.com
eCredit.com Inc., Dedham, Mass.
www.ecredit.com
Emagia Corp., Santa Clara, Calif.
www.emagia.com
GetPaid Corp., Parsippany, N.J.
www.getpaid.com
I-many Inc., Edison, N.J.
www.imany.com
London Bridge Group, Norcross, Ga.
www.london-bridge.com
Ontario Systems LLC, Muncie, Ind.
www.ontariosystems.com
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