At a time of rising demand on the collection side and decreasing ability on the payment side, companies need to keep the cash flowing and the business running.
That’s especially true for small and midsize businesses (SMBs), which often struggle with cash flow and have a sizable amount of late payments when they provide their product on credit. Unlike larger businesses, they can’t necessarily go to their relationship banker for a loan.
“During the pandemic, clients realized that digitalizing credit control helped them to improve their gross margins,” Dimitri Raziev, CEO and co-founder at Kolleno, told PYMNTS. “A lot of clients, they focused on the top line, but the pandemic made them realize if they want to make their working capital working better, if they want to have improvements in cash flows, the only way that they can do that is basically accelerate payments.”
Diagnosing the Client’s Accounts Receivable
On March 9, Kolleno, a FinTech startup specializing in accounts receivable (AR) management for SMBs, announced that it had raised 4 million pounds ($5.2 million) in seed funding.
The company helps SMBs digitize the credit-control cycle by using an all-in-one, invoice-to-cash platform. Raziev describes it as a communication platform embedded within risk profiling embedded within payments.
When it comes to collection and receiving payments, the platform indicates the best course of action. It does so by diagnosing the client’s accounts receivable and providing a different strategy and messaging tailored to each customer. So it will draft an email in a different tone of voice for a customer that has not been paying for the past 90 days as opposed to a customer that has missed only one invoice.
Delivering a 21st Century Cash Collection Approach
Raziev gave the example of how the platform might suggest handling a failed payment: If the customer represents 10% of a client’s receivable book, it might suggest calling them. On the other hand, if the customer is among the bottom 25%, the platform might suggest texting or emailing them.
“Based on the client concentration risk, the platform takes different actions, so this is the 21st century cash collection approach,” Raziev said. “As opposed to you pushing, the platform informs you how to reduce your manual processes and how to reduce that administrative burden.”
The platform also may find that a client hasn’t replied to emails but replies to most text messages. It could be that this client is on the road working. So, the platform includes a payment portal and several payment options so the client can pay through their cellphone.
With this personalized approach, people are more willing to engage in the conversation, and the result is faster payments.
“To be honest, we don’t have a magic ball to receive payments faster than anyone else, but it’s all about this waterfall of different steps that we’re using,” Raziev said.