AI for chasing overdue accounts by risk rather than by age

5 days ago
3 min read

Updated: 3 days ago

Introduction

Credit control in most small businesses is a list sorted by age, worked from the top. It is a reasonable default and it is not the best use of a limited amount of chasing time. The oldest debt is frequently the least recoverable, having already resisted several attempts, while a large invoice a fortnight overdue from a customer showing signs of difficulty is the one that needs attention today.

Ranking by recoverability and by risk of loss produces a different order and a materially better result. The information required is already in your records: payment history, dispute history, order behaviour, and how each customer has responded to previous chasing.

1. AI for chasing overdue accounts by risk changes the order of the list

Same effort, better result.

Rank by amount at risk multiplied by the probability of loss, rather than by days overdue. The top of that list is where the day's calls should go, and it rarely matches the top of the aged list.

2. Use payment history as the primary signal

Customers are consistent.

Most customers have a habitual pattern — always fifteen days late, always pays on the second reminder — and a deviation from that pattern is far more informative than the absolute number of days. The deviation is the alert.

3. Watch for the signs of genuine difficulty

Where the real losses are.

Part payments where there were none before, a promise followed by silence, orders increasing while payments slow, a change of finance contact, or a request to extend terms. These precede insolvency and they are visible in your own data.

4. Separate a dispute from a delay

Completely different processes.

An unpaid invoice because of a service problem needs the problem resolved, not a reminder. Chasing a disputed invoice repeatedly damages the relationship and delays payment, and the two categories should never be on the same list.

5. Automate the routine reminders, escalate personally

The right division.

The first and second reminders can be automatic, polite and reliable. The point at which a human being calls should be determined by risk, and it should come earlier than most businesses allow.

6. Make the invoice easy to pay

Frequently the whole problem.

Correct purchase order reference, right contact, right format, clear payment details, and delivered to the person who processes it. A meaningful share of late payment is administrative failure at your end rather than reluctance at theirs.

7. Invoice immediately and confirm receipt

The cheapest improvement available.

Days between completion and invoicing are days added directly to your payment terms. Confirming the invoice was received and is in the payment run removes the most common cause of a surprise at due date.

8. Decide your escalation ladder in advance

Consistency is what works.

Reminder, call, statement, stop supply, formal demand, external recovery. With dates. Ad hoc escalation teaches customers that your terms are negotiable, and the ladder is more effective than any single firm conversation.

9. Report days sales outstanding and the ageing profile

The management measures.

Both, monthly. A stable average can hide a growing tail, and the tail is where the write-offs come from. Improving this number improves cash without any change in sales.

Debt recovery, formal demands, interest on late payment and insolvency procedures are all governed by rules that vary by jurisdiction, and the sequence matters. Take advice before formal steps rather than after.

Conclusion

Rank the list by risk of loss rather than by age, because the oldest debt is not the most recoverable.

Use each customer's own payment pattern as the baseline and treat deviation as the alert, watch for part payments, broken promises and rising orders alongside slowing payments, separate disputes from delays and handle them differently, automate early reminders and escalate to a person based on risk, make sure your invoice is easy to pay and correctly addressed, invoice immediately and confirm receipt, fix your escalation ladder in advance, and report both average days outstanding and the ageing tail.