According to a recent study by Deloitte, 70% of businesses say that payment date prediction is a top priority.
Predicting payment dates is a critical task for any business, but it can be challenging, especially for businesses with a large customer base. Traditional methods of payment date prediction, such as historical data analysis and manual forecasting, are often time-consuming and inaccurate.
However, the rise of artificial intelligence (AI) is changing the game for payment date prediction. AI-powered solutions can analyze large amounts of data quickly and accurately to identify patterns and trends that would be difficult or impossible for humans to detect.
This allows businesses to make better predictions about when their customers will pay, which can lead to improved cash flow, reduced risk of bad debt, and better decision-making.
Imagine you're running a business, and you have to deal with various payments, whether it's from your customers, suppliers, or partners. Predicting when these payments will come in is a bit like predicting the weather - it can be quite unpredictable. That's where AI, or Artificial Intelligence, comes in to save the day.
The first step in AI-powered payment date prediction is to collect data. This data can include historical payment records, information about customers and suppliers, economic data, and much more. The more data AI has, the better it will be able to learn and make accurate predictions.
Some of the specific data points that AI-powered payment date prediction solutions typically analyze include:
- Customer payment history: This includes information about how often customers pay their bills on time, how late they typically pay, and the average amount of time it takes them to pay.
- Account balance: The AI solution will also look at the customer's account balance to get a sense of their overall financial health.
- Industry trends: AI can also learn from industry trends to make predictions about payment dates. For example, if a particular industry is known for having late payments, the AI solution will adjust its predictions accordingly.
- Economic conditions: Economic conditions can also impact payment dates. For example, if the economy is doing well, businesses are more likely to pay their bills on time.
- Credit score: The customer's credit score can also provide insights into their likelihood of paying their bills on time.
- Payment terms: The payment terms of the invoice will also be considered by the AI solution. For example, if the invoice has a net 30 payment term, the AI solution will predict that the customer will pay within 30 days.
- Invoice amount: The amount of the invoice can also be a factor in predicting the payment date. For example, businesses may be more likely to pay smaller invoices on time than larger invoices.
- Days past due: If the invoice is already past due, the AI solution will take this into account when making its prediction.
Once the AI solution has collected all of this data, it begins to look for patterns. For example, the AI solution may learn that customers in a particular industry are more likely to pay their bills on the 10th of the month. Or, the AI solution may learn that customers with a high credit score are more likely to pay their bills on time.
AI uses a special kind of learning called machine learning to learn from the data and make predictions. Machine learning allows AI to improve its accuracy over time as it is exposed to more data and learns from its mistakes.
Once the AI solution has learned from the data and developed a predictive model, it can be used to predict payment dates for new customers or invoices. The AI solution will take all of the relevant data points into account, such as the customer's payment history, account balance, and industry trends, to make its prediction.
AI-powered payment date prediction solutions are constantly learning and improving. As the AI solution is exposed to more data and learns from its predictions, it will become more accurate over time.
Once the AI solution has analyzed all of this data, it can generate a prediction for when the customer is most likely to pay. This prediction is based on the patterns and trends that the AI solution has identified in the data.
A report by Gartner found that AI-powered payment date prediction solutions can improve cash flow by up to 10%.
There are many benefits to using AI to predict payment dates, including:
- Improved accuracy: AI-powered payment date prediction solutions are typically more accurate than traditional methods, such as historical data analysis and manual forecasting. This is because AI solutions can analyze large amounts of data quickly and accurately to identify patterns and trends that would be difficult or impossible for humans to detect.
- Reduced risk of bad debt: By predicting when customers are most likely to pay, businesses can reduce the risk of bad debt. This is because they can take steps to collect payments before customers become delinquent.
- Improved cash flow: By knowing when customers are most likely to pay, businesses can better manage their cash flow. This can help them to avoid overdrafts and late payments to suppliers.
- Better decision-making: Payment date predictions can help businesses to make better decisions about things like credit extension, inventory levels, and staffing.
By predicting payment dates, AI can help businesses to reduce late payments in a number of ways. For example, businesses can use AI to:
Send proactive reminders to customers who are at risk of late payment: AI can help businesses to identify customers who are at risk of late payment and send them proactive dunning reminders. This can help to reduce the number of late payments without damaging customer relationships.
Develop tailored collection strategies for different customer segments: AI can help businesses to segment customers into different risk categories and develop tailored collection strategies for each segment. For example, businesses may choose to be more aggressive with their collection efforts for customers who are at a high risk of late payment.
Automate the collections process: AI can automate many of the tasks involved in the collections process, such as sending reminders, following up with customers, and negotiating payment plans. This can free up staff to focus on more complex tasks
Constant is an AI-powered platform that helps businesses predict customer payment dates and improve their accounts receivable process.
This can help businesses improve cash flow, reduce the risk of bad debt, and make better business decisions.
Constant, also offers a number of other features, such as automated dunning, payment plans, and integration with popular ERP systems, to help businesses further improve their accounts receivable process.
If you are interested in learning more about how Constant can help your business to predict payment dates and improve your accounts receivable process, please visit our website or book a demo.
