The Best Credit & Collections Departments Don't Just Collect Money. They Build Systems.

This may sound strange coming from someone who has spent most of his career in Credit and Collections, but I don't want my Collections team to be great at collecting money.

Don't get me wrong. They better know how to collect money. I want people who can pick up the phone, negotiate a payment, work through a dispute, understand customer behavior, build relationships, and know when it's time to escalate an account.

However, if the success of my Credit and Collections department depends entirely on how good my collectors are at chasing customers every month, something is wrong. The best collection call is the one we never needed to make. The best dispute is the one we prevented. The best past-due invoice is the one that never became past due.

The best Credit departments don't spend all of their time reacting to problems. They build systems that prevent those problems from happening in the first place.

Collections Is Usually Where the Problem Becomes Visible

One of the unfortunate realities of Accounts Receivable is that Collections tends to become the place where everyone else's problems eventually arrive.

The customer wasn't onboarded correctly? Collections finds out when the invoice isn't paid.
The purchase order was missing? Collections finds out.
The invoice went to the wrong email address? Collections finds out.
The customer requires invoices to be uploaded into a portal? Collections finds out.
The pricing was wrong, the equipment was returned incorrectly, the tax status wasn't updated, the credit memo never got processed, or the customer doesn't recognize the charge? Guess who finds out? Collections.

Then leadership looks at the aging report and asks the obvious question.

"Why aren't we collecting this?"

Sometimes that's the right question. Sometimes it isn't. The collector may be looking at an invoice that was never truly collectible in its current form. You can't “collection call” your way out of a broken process. That's why I believe one of the biggest mistakes organizations make is measuring Credit and Collections primarily by how effectively the department reacts to delinquency.

Of course we should collect past-due invoices, but a high-performing accounts receivable team should also be asking a much more important question:

Why did this invoice require collection activity in the first place?

Stop Celebrating Heroics

Every Credit department has heroes.

They're the collector who somehow gets the impossible account to pay. They're the person who knows exactly who to call when something goes wrong. They're the employee who has a spreadsheet containing information nobody else can find. They're the one person who knows how a particular customer's portal works, which person at the branch can fix a billing problem, or which Sales representative can finally get the customer to respond.

Those people are incredibly valuable. They're also dangerous. Not because they're doing anything wrong, but because the organization can become dependent on them.

If your process only works because Susan has been there for twelve years and knows every workaround, you don't have a process. You have Susan…and you better hope Susan doesn't take a vacation.

Great departments take what their best people know and turn it into systems the entire organization can use. That doesn't eliminate expertise. It multiplies it.

A System Starts Before the Invoice Exists

This is where the traditional definition of Collections becomes too narrow. If we want better collection results, we shouldn't start with the collection call. We should start much earlier.

Who are we extending credit to?
How are we determining credit limits?
What information are we collecting during onboarding?
Are billing requirements documented?
Do we know whether the customer requires purchase orders?
Are tax documents current?
Do we understand their invoicing portal?
Have we established the correct contacts?
Are invoices being delivered accurately and on time?
Are disputes being resolved quickly?
Are payments being applied correctly?
Are credit limits being reviewed as customer behavior changes?

Look at all of those questions? Can you imagine having to keep track of that? If only we had a system in place.

Now, does Accounts Receivable own every one of those processes? No. But A/R lives with the consequences when they fail. That's why a strong A/R system can't exist in isolation. It has to connect with Credit Operations, Sales, Billing, Operations, and Cash Application. Every one of those decisions affects Collections. That's why A/R has to be connected to the entire revenue-to-cash process.

A collector can absolutely improve DSO by becoming better at collecting, but an organization can improve DSO by making fewer invoices difficult to collect.

Those are two very different strategies. The second one scales much better.

Build the Process Before You Buy the Technology

This is where companies sometimes get things backwards. They buy software expecting the software to fix the process. It won't.

If your escalation process doesn't make sense today, automating it won't suddenly make it intelligent. If nobody owns disputes, a new dashboard isn't going to resolve them. If your customer data is inaccurate, connecting three systems together just allows inaccurate information to travel faster. If your team doesn't know when an account should be placed on credit hold, AI isn't going to magically create a coherent credit policy for you.

Technology can accelerate a good process. It can also accelerate a bad one.

Before automating anything, I want to understand the process. What triggers the action? Who owns it? How quickly should it happen? What happens if it doesn't happen? When does it escalate? Where is the information stored? What should happen automatically? Where is human judgment required?

Once those questions have answers, technology becomes incredibly powerful. Now we aren't buying software for the sake of "modernizing." We're using technology to execute a system we've intentionally designed.

Automate the Work. Don't Automate the Judgment.

I said this recently when discussing customer onboarding, and I think it applies to nearly every part of the process.

Automate the work. Don't automate the judgment.

There is an enormous amount of work inside Credit and Accounts Receivable that doesn't require someone with ten or twenty years of experience.

Sending routine reminders. Pulling reports. Matching information between systems. Routing applications. Identifying missing documents. Tracking expirations. Assigning collection activities. Sending statements. Matching straightforward payments. Creating follow-up tasks. Monitoring changes in customer information. Updating dashboards.

Those are exactly the types of activities we should be trying to automate. Why?

I don't want my experienced accounts receivable professionals spending their days doing work a system can do. I want them investigating exceptions. I want them evaluating risk. I want them resolving complex disputes. I want them negotiating difficult accounts. I want them talking with Sales and Operations. I want them analyzing why something keeps going wrong. I want them identifying payment patterns, improving cash flow, and finding ways to remove friction from the revenue-to-cash process.

I want them improving the system. That's where their experience creates the most value.

And Yes, AI Belongs Here

AI should absolutely become part of the modern Accounts Receivable system.

I think we're asking the wrong question when we ask whether AI is going to replace Credit and Collections jobs. The more interesting question is:

How much work are Accounts Receceivable teams doing today that they shouldn't have to do five years from now?

AI can help summarize customer histories, identify unusual payment behavior, categorize disputes, prioritize accounts, surface changes in risk, analyze communication, identify recurring problems, and help professionals make sense of enormous amounts of information much faster than they can today.

That creates an opportunity. Not to remove every human from the process.

To move humans toward the work where humans create the most value. I always say that Credit and Collections is both art and science. Technology is becoming extraordinarily good at the science. Give me the data. Find the pattern. Surface the exception. Show me where something changed. Tell me which accounts deserve attention. Then let an experienced Credit professional decide what to do about it.

The future isn't AI replacing A/R pros. It's A/R pros using AI, automation, data, and human judgment to build better systems than departments still operating primarily through spreadsheets, inboxes, and tribal knowledge.

Every Repetitive Problem Is Trying to Tell You Something

This might be the biggest mindset shift of all. When the same problem happens repeatedly, we tend to become really good at fixing it. I want to know why it keeps happening.

If customers repeatedly dispute freight charges, don't just train Collections to resolve freight disputes faster. Find out why customers are disputing freight.
If invoices repeatedly get rejected because they're missing purchase orders, don't create a better collection template asking customers for POs. Fix the process that allowed the invoice to be generated without one.
If customers repeatedly send payments without remittance information, don't accept that Cash Application will spend hours researching payments forever. Ask whether we can change payment instructions, portal behavior, customer communication, or automation to reduce the problem.
If the same branch repeatedly creates billing issues, don't just give the collector the branch manager's phone number. Find out what is happening at the branch.

Recurring problems aren't just work. They're data. They're telling you where the system is failing. The best teams listen.

Measure the System, Not Just the Outcome

This is also why I think traditional metrics can be limiting.

We measure:
DSO
Past due percentage
90+ aging
Bad debt
Cash collected

Those numbers matter, but they're mostly outcomes. If we want to build better systems, we also need to understand what produces those outcomes.

How many invoices were disputed? Why? How long did disputes remain unresolved? How many customers had incorrect billing information? How many invoices were rejected by customer portals? How long did onboarding take? How many accounts exceeded their approved exposure? How much collector time was spent fixing operational issues instead of collecting? How much cash sat unapplied because remittance information was missing? Which branches, customer segments, products, or processes repeatedly create problems?

Now we're no longer simply measuring Collections. We're measuring the revenue-to-cash system.
Once we understand the system, we can improve it.

Great Systems Create Capacity

This is where the business case becomes much bigger than Credit and Collections. Every problem we eliminate gives time back to the organization.

If automation saves a collector thirty minutes every morning, that's capacity. If better onboarding prevents ten disputes, that's capacity. If improved cash application eliminates hours of research, that's capacity. If a better workflow prevents Sales from getting pulled into old billing problems, that's capacity. If a dashboard eliminates three manually prepared spreadsheets, that's capacity.

Companies often think about automation entirely through headcount reduction. I think that's shortsighted.

The better question is:

What could your people accomplish if they stopped spending so much time fixing preventable problems?

Maybe they manage more customers. Maybe they perform more proactive credit reviews. Maybe they identify risk sooner. Maybe they spend more time with strategic accounts. Maybe they analyze customer behavior. Maybe they improve processes. Maybe they start helping the organization identify growth opportunities.

That's when Accounts Receivable becomes something much more valuable than a department responsible for chasing overdue invoices. It becomes a function that actively improves how efficiently revenue becomes cash.

The Goal Is Not a Better Collections Department

This is ultimately where I think the profession is headed.

The goal shouldn't be building a world-class team of people who are exceptionally good at chasing overdue invoices. The goal should be building a system where fewer invoices need to be chased.

That requires good people and good processes. It requires technology and automation. Increasingly, whether you like it or not, it will require AI.
But most importantly, it requires a department willing to look beyond today's aging report and ask why the aging report looks the way it does.

Collections will always matter. There will always be customers who pay late. There will always be disputes. There will always be exceptions, difficult conversations, financial problems, and accounts that require experienced professionals to step in. The best teams won't judge their success solely by how much money they collected this month. They'll judge themselves by how much unnecessary collection work they eliminated from next month.

It isn't just about collecting money. It's about building systems that make getting paid easier.
Eventually, the very best systems make some collection activity unnecessary altogether.

Because at the end of the day...

Revenue is created in Sales.
Revenue is protected through Credit Operations.
Revenue becomes cash through Accounts Receivable.
Revenue Intelligence identifies growth opportunities.

Revenue Operations ensures none of those steps fail.