One conclusion that stood out in the analysis of May's Credit Today's Benchmarking Survey on Collection Automation is that, more than ever, cash is king. Companies that have cash have options, whereas those that are leveraged with debt are having a much tougher time of it. As a consequence, AR performance in general and cash flow in particular are critical. No enterprise, especially in these economic times, can afford to see cash flow slump or tolerate bloated receivables.

To keep pace with corporate cash flow objectives, our survey found that most credit organizations have turned to collection automation tools to improve performance.

Delving deeper into the survey results to better understand the relationship between automation and performance, we found the following. Larger firms are more likely to automate collections than smaller concerns. The key factors here are number of collectors and numbers of customers. It follows that too many accounts and too few collectors will hinder performance. Individual collector productivity is critical. Up to the point of diminishing returns, the more calls and correspondence your collectors can generate, the better will be your department's performance. Automation is clearly effective in increasing collector productivity.

Nearly half of our sample reported being partially automated, and only one out of seven admits to an essentially manual collection environment. The flip side is that 37 percent report being highly automated. This raises the question of whether there is a relationship between company size and the utilization of automation. To better assess any correlations, we compared levels of automation against company revenue, number of customers and number of collectors.

A graduated trend toward automation is very apparent when automation is tracked against number of collectors. Firms with three to nine collectors are almost twice as likely to be highly automated as credit departments with fewer than three collectors, and those with more than 10 are three times as likely to be highly automated compared to the smaller departments.

When we examined collection automation by company revenue there was a similar trend toward increased automation for larger businesses. We found that medium-sized businesses are highly automated at about the same frequency as their smaller brethren, but are about 30 percent more likely to implement partial automation solutions. Also, a very small percentage of medium and large firms rely on manual collection processes. Very similar results were reflected when collection automation was tracked by number of customers.

This is interesting in that the alternative to automation is more staff, and so we would not have been surprised to find that the level of automation dropped as collection staffs increased.

However, the survey clearly showed that the utilization of automation increased proportionately with the number of collectors. If we assume that collection automation tools increase productivity, the benefits should be magnified by the number of users. It follows that, the bigger your credit department, the bigger the benefits of automation you should anticipate.

So, what are the relationships between corporate revenue, number of customers, and number of collectors on collection performance? When we looked at revenue and collectors, there were minimal differences and no discernable trends from small to medium to large. However, performance trended downward as the number of customers increased. The biggest surprise is that firms with 5,000 or more customers fell far short of the norm--only 65 percent meeting or exceeding goals versus 78 percent for the entire sample.

To get a better idea of the productivity benefits that collection software delivers, the survey asked for the minimum number of collection contacts that were expected from each collector (29 on average) each day. Nearly half of our respondents reported requiring between 20 and 30 contacts to be made daily by each collector. The rest of the sample was pretty evenly split, reporting they require more or less than those numbers.

Interestingly, the middle range of 20-30 also shows the best performance results. There is a point somewhere above 30 contacts per day when the effectiveness of making additional contacts begins to decrease--quality counts.

Finally, when automation is compared to the number of minimally acceptable contacts, it is very apparent that automation facilitates an increase in contacts. The upward trend in automation is fairly consistent across all three segments.

Increases in collection automation tend to improve performance. Based on the survey results, if your collectors are having trouble making an acceptable number of quality contacts each day, the more collectors there are on your staff, and the more customers in your receivables portfolio, the greater should be the impact of automation on your collection performance. However, automation is not a guarantee. Automating weak process will still produce weak results.

For more charts and commentary go to http://www.credittoday.net/members/2579.cfm

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