Case Study: Couchbase Cuts DSO 10 Days, Doubles Collections in a Year with Tesorio
Couchbase is the creator and maintainer of a powerful NoSQL database that helps deliver ever-richer and ever more personalized customer and employee experiences on any device, anywhere. Based in Silicon Valley, Couchbase counts dozens of Fortune 500 companies as customers, including AT&T, Verizon, Wells Fargo, Comcast and United Airlines.
Couchbase was growing sales and revenues quickly. Company CFO Greg Henry, however, believed Couchbase could significantly improve its cash flow and sustainable growth rate by improving collections and cash flow forecasting. This would help Couchbase use working capital more efficiently. “I knew we needed to get better,” says Henry. “We were linearly scaling our collections team with business growth.”
Henry also lacked cash flow insights. “The ERP did its job but we needed better insights and better analysis without bringing in more human resources,” says Henry. Manual cash flow forecasts via spreadsheets required 10 days for his team to complete. This lack of timely insights diminished Henry’s decision-making ability. “Because we didn’t know where we were on cash, we couldn’t make decisions fast enough. If collections were delayed, I needed the information right away to make adjustments to deliver on a cash number,” says Henry. And his team had no way to easily communicate collections status to other teams or to automate tedious collections processes like dunning.
To summarize, Couchbase wanted to:
- Improve collections efficiency without boosting headcount
- Improve DSO/DPO ratio
- Receive timely insights into cash flow events
- Build cash flow forecasts faster
Learn How Couchbase Doubled Collections
Make It (Ridiculously) Easy to Pay
This sounds silly but including a link to direct payment options will radically increase the chances that you will get paid quickly. The link should take them to a payment gateway that can ideally handle credit card, ACH/EFT, and Wires. Make it stupid simple for the recipient to pay their debt. For that payment link, as well, make sure that you are sending a secure (https://) domain. With the rise in spearfishing and email fraud targeting company AP departments, it’s important to make the paying feel as secure as possible.
Speed Up the Cadence
Many companies have a practice in collections and accounts receivable management that is to send out the first collections notice when a customer is 15 to 30 days late in paying their invoice. This may be too long to wait. A good amount of research has found that the earlier you notify customers they are late, the more likely you are to get paid. In fact, as often as not, late payment isn’t a conscious decision but an oversight or a reflection of your low priority in the bulging queue of an overworked accounts payable team. With that in mind, you may want to send the first note even if the invoice is a week or even a few days late. Consider, as well, the size of the customer and past customer payment behavior. If a customer pays 30 days late like clockwork, then it may not be worth the effort to accelerate their payment because you are encountering an internal policy of 30 days late payment. (You might be able to learn this information from a quick conversation with your AP team counterpart).
Consider Whether Advanced Dunning Automation Tools Makes Sense
Most of the ERP systems, such as NetSuite, have some automated dunning campaign features. That said, collections teams may want to consider third-party solutions that give greater flexibility and control over dunning. For example, running campaign tests in many ERP dunning systems is not possible, and creating multiple templates is time-consuming and challenging. If your dunning ERP’s default automation system is boxing you in and is hard to use, you may want to consider shopping around for a collections automation product that has modern software features like team assignments, bulk actions, and multiple-templates. Dunning automation tools can also help you ensure that your emails are actually delivered: just like email marketing, blasting out 1,000 dunning emails in a short span of time will trigger Spam filters and significantly reduce the likelihood that your emails are received, let alone read. Recovering from a Spam catastrophe like this can be painful and require weeks of time working with IT teams. So consider the risk you may be taking before you push send.
After reading this, we hope you will have some ideas on how to think about building out a detailed and effective collections campaign structure. Most of what we talk about here can be turned into a repeatable process that your collections team and accounts receivable managers and analysts can fine tune and revise to improve results. You may want to revisit your process and look at the data a quarter or six months after you first implement. You should see positive results that will convert into improved metrics for Days Sales Outstanding, Average Days Delinquent, and Free Cash Flow.