With nearly 50% of all B2B invoices being overdue and 42% of U.S. companies reporting setbacks in meeting financial goals due to late payments, most enterprise AR teams feel like they are drowning in endless waves of past due accounts.
These teams escalate collections to third-party agencies, often later than they should, because it is the only option left after internal points of leverage, like service suspension and legal action, have been exhausted. But outsourcing comes with major downsides: loss of control over the customer experience and sky-high commission rates of up to 20-30%. On top of that, industry data clearly shows that collections rates decline as debt ages.
The good news is there’s finally a better option for resource-constrained teams. Industry pioneers refer to this emerging category of collections solutions as Leverage-as-a-ServiceTM (LaaS).
In this article, we’ll cover:
- What a LaaS-based collections solution is and how it works
- Where LaaS-based solutions fit into the existing collections escalation process
- Why this new solution category is revolutionizing the way enterprise collections teams manage overdue accounts
- How Debt Register, the leading LaaS-based solution, is revolutionizing the way enterprise collections teams operate
What are Leverage-as-a-Service (LaaS)-based collections solutions, and how do they work?
The power of collections teams stems from the ability to apply leverage. Traditional methods include things like suspending service, initiating legal action, or handing off accounts to third-party agencies. LaaS-based collections solutions offer internal collections teams the power of third-party leverage without requiring them to completely surrender the debtor’s account. Maintaining control allows AR teams to improve internal recovery rates, boost operational efficiency, and strengthen cash flow.
The goal of LaaS isn’t to completely replace third-party agencies entirely, but to help AR teams to get more value from internal efforts before outsourcing overdue debt.
Here’s how it works:
- Upload overdue accounts to your chosen LaaS-based solution
- Allow the platform to send autonomous, consequence-driven messages directly to debtors, irrespective of currency billed or customer location
- Receive payments directly to your bank account
- Track progress and maintain full visibility with real-time reporting
Starting with a LaaS-based escalation ensures that overdue accounts ultimately sent to a third-party agency truly require external outsourcing. This “dual-stage” approach results in higher overall recovery rates, according to data from Debt Register, the pioneer and industry-leading provider of LaaS-based collections solutions.
Introducing Debt Register: The world’s first LaaS solution
As the first Leverage-as-a-Service (LaaS) platform, Debt Register offers an AI-powered solution that empowers collections teams to recover overdue accounts faster and with less friction.
Debt Register’s solution, built by a credit professional for credit professionals, is powered by years of operational insight and rooted in extensive analysis of overdue payments.
Here’s what sets Debt Register part:
- Bad data is expensive. About 40% of overdue payments are delayed due to inaccurate contact data and your third-party agency knows this. To ensure communications land in the right inboxes, Debt Register validates email addresses against a proprietary database of 10 billion contacts before reaching out to your debtors. Improving data integrity measurably boosts customer connection and engagement rates.
- It’s no secret among credit professionals that third-party pressure works. Close to 30% of overdue invoices are paid immediately after a third-party name is introduced. That’s why Debt Register sends messages directly to debtors, but unlike third-party agencies, your team retains control of the relationship and has full visibility.
- The way to create urgency is by introducing real, far-reaching consequences. Since service suspension alone doesn’t always drive action, Debt Register warns accounts that debts that remain unpaid after 10 days will be reported to global credit agencies. This consequence, which leverages the entire supply chain, creates a sense of urgency that is much better received by debtors than the pressure applied by third-party agencies.
Debt Register’s clients have seen powerful results with a dual-stage approach. About 38% of “unengaged” overdue accounts uploaded to the platform are ultimately settled within 10 days while saving clients up to 50% in agency-related costs.
One example is global technology powerhouse Johnson Controls. The company is seeing a significant boost to internal collection rates after adding Debt Register to their existing escalation process. In addition to seeing a decrease in bad debt write-offs, Johnson Controls is estimating it will save $1.92MM in third-party fees in the first year alone.
Senior Finance Manager at Johnson Controls, Angelica Bontea, said it best:
“Debt Register is extremely user-friendly and flexible. We saw the benefits after the first month—it helped us clean data, reach clients, and accelerate collections.”
Collections Just Got Easier
Debt Register’s Leverage-as-a-Service solution delivers just the right pressure to create urgency, drive payments, and minimize third-party escalations.
Get started with a free trial today to see what Debt Register can do for your company.