Is Your Collections Strategy Costing You Customers and Cash?
If invoices are falling through the cracks, chances are your customer relationships are too. How so? Because for modern businesses, every touchpoint, even collections, is a moment that can make or break that relationship. True success in collections means prioritizing long-term value—like retention and forecast accuracy—by shifting KPIs beyond payment recovery to metrics that reflect overall customer and financial health. Let us explain.
In a one-time transaction model, collecting 80 cents on the dollar can be considered a win—you secure whatever payment you can, then move on. But in recurring revenue, that same customer will be invoiced again next month, and the next. Every collection interaction becomes part of an ongoing customer journey. Aggressive tactics that might recoup cash today could cost you significantly more in lost recurring revenue tomorrow.
At the same time, modern businesses that bill their customers on a recurring basis—such as software-as-a-service (SaaS) and subscription-based companies—rely on steady cash inflows from customers. But ensuring those recurring payments arrive on time is an increasing challenge. In today’s environment, even as companies tighten payment terms, the average days sales outstanding (DSO) has risen from about 31 to nearly 40 days since 2021, and late payments are surging. Invoices fall through the cracks or are simply given up on.
For CFOs and Chief Accounting Officers (CAOs), these trends signal potential cash flow problems, which could result in revenue leakage. Depending on the size of the company, even just a few large overdue invoices could quickly put the business in the red. In addition, research shows that only about half of organizations today are closing the books within a week, often due to manual work and breakdowns in AR processes.
One root cause that’s frequently overlooked: collections is too often siloed. Whether it’s managed manually in spreadsheets or tucked away in a standalone point solution, collections can create a disjointed order-to-cash process. This fragmentation creates ripple effects across the business—delayed closes, inaccurate forecasts, missed revenue, and even customer churn.
For companies operating on recurring revenue models, these aren’t isolated symptoms—they’re systemic risks. To mitigate them, finance leaders must elevate collections from a tactical cash recovery function to a strategic pillar of customer trust and long-term revenue growth.
“By consensus, organizations should complete their close within one business week, yet our Office of Finance Benchmark Research found that only 50% can finish the quarterly close within six business days. Problems that arise in manual A/R processes—fumbled handoffs, approval roadblocks, rework needed due to errors, or poor data quality and availability—can all be factors in delaying the close.”
Source: Ventana Research
The top 3 collections challenges finance leaders are hearing...
… and how they’re quashing customer lifetime value (LTV)
Challenge 1: “We don’t have visibility into systems that can tell us about the full customer lifecycle.”
The first big challenge? Data fragmentation. Collections teams are flying blind, stitching together insights from billing, CRM, and support systems. Many traditional AR tools are designed with a transactional mindset—they provide adetailed view of invoices but lack context about customer relationships, payment behaviors, or the broader financial history. And because information from emails with customers, such as promises to pay or billing disputes, is often logged manually in spreadsheets or a separate system, it’s prone to getting lost in the shuffle. This wastes time and can leave teams unclear on the latest customer status.
Collections teams using traditional AR tools are effectively operating in isolation, separated from critical insights held in sales, billing, and customer success systems. Without access toa comprehensive financial history or customer status, they struggle to tailor their approach appropriately. By the time they have a clear view of the customer lifecycle, it’s already too late. Collections conversations without context can damage relationships—turning what should be a routine engagement into a tense interaction.
Put simply—you can’t maintain and grow a relationship with a customer you don’t understand. And in a recurring model, every misunderstanding presents a risk to future revenue.
Challenge 2: “We’re trying to work with other customer-facing teams, but we don’t know what they’re doing.”
The second major challenge? A lack of coordination across customer-facing teams. Your collections team might send a payment reminder at the exact moment sales is negotiating an upsell or support is working to resolve an issue. Internally, these are separate functions. But to the customer, they’re all part of a single relationship—with your company.
They don’t distinguish between collections, sales, or support—they just see you as one company. So when messages are misaligned or poorly timed, it feels disjointed and impersonal. The result? Confusion, frustration, and a loss of trust.
You may be trying to build strong customer relationships, but fragmented systems and siloed communications are working against you. Without real-time visibility and cross-functional coordination, your efforts to retain customers and recover revenue are undermined at the most critical moments in the customer journey.
Challenge 3: “Our one-time payment collections mindset isn’t cutting it anymore and we’re missing the patterns that make recurring revenue predictable.”
Maybe your collections team is constantly being asked, “Where are we going to land this month?”—but they don’t have the tools to answer with confidence. That’s because traditional AR systems are designed to track invoices, not customers. They focus on individual transactions—Invoice 1, Invoice 2, Invoice 3—rather than recognizing the broader patterns that define how a customer behaves over time.
But in a recurring revenue model, looking at past invoices in isolation won’t help you predict when Invoice 4 will get paid. What will? Looking at how a customer has paid in the past—across all their invoices—and comparing that to similar patterns across your customer base. When you understand payment behaviors in aggregate, you can begin to forecast with accuracy and intervene before issues arise.
That’s where most AR tools fall short—they lack the historical context and predictive intelligence to answer forward-looking questions. Without AI-powered forecasting, your team is left reacting to missed payments rather than preventing them. You can’t identify at-risk accounts early, you can’t proactively engage customers before they slip into delinquency, and you can’t deliver the cash flow predictability that finance leaders depend on.
This isn’t just a tooling problem—it’s a visibility gap that keeps collections teams stuck in the rearview mirror, when what they really need is a predictive, customer-centric view of the road ahead.
The strategic shift: rethinking collections for long-term value
For recurring revenue businesses, collections can no longer operate as a back-office function focused on chasing dollars. It must evolve into a strategic discipline—one that preserves trust, strengthens customer relationships, and safeguards predictable revenue streams.
Lead with insight, not urgency
In a recurring model, context is everything. Collections teams need integrated, automated workflows that leverage comprehensive customer context—from historical payment behavior to real-time interactions—to tailor outreach that builds trust and enhances efficiency. That means building tight feedback loops with sales, billing, and customer success so that outreach isn’t just timely—it’s informed, coordinated, and empathetic. A reminder sent in isolation may resolve one invoice, but a collections approach grounded in relationship context can preserve a multi-year customer.
Turn collections into a relationship-building moment
Every interaction with a customer is a chance to either build or erode trust. The best-performing AR teams don’t treat collections as an interruption to the customer journey—they make it part of the journey. When collections is rooted in mutual understanding—acknowledging open support issues, recognizing payment trends, and adapting to recent changes—it becomes a reinforcing touchpoint rather than a disruptive one.
Move from reactive to anticipatory finance
Modern finance leaders must leverage predictive insights—driven by AI and historical payment data—to move beyond reactive aging reports and proactively engage accounts at risk before payment issues emerge. By focusing on payment behaviors and risk signals earlier in the lifecycle, collections becomes a proactive function. This strategic foresight allows teams to engage at-risk accounts before problems materialize, reducing churn and driving more predictable cash flow.
Redefine what success looks like
Success in collections isn’t just a paid invoice—it’s a retained customer, a smoother renewal, a more confident forecast. That means shifting KPIs from short-term recovery metrics to indicators that reflect long-term health: days sales outstanding (DSO) trends, retention impact, and collections efficiency benchmarks that compare not just within your business—but across your industry.
Practical next steps:
1. Audit your current collections approach: Identify gaps where customer context, predictive analytics, or internal integration is lacking.
2. Invest in technology that supports context and AI: Select platforms designed specifically for recurring revenue models, providing comprehensive order-to-cash visibility and predictive capabilities.
3. Train your Collections team: Equip them to use customer insights and predictive analytics effectively, turning collections conversations into relationship-building opportunities.
The path forward: Turning collections into a growth lever
In today’s recurring revenue environment, collections is no longer just about recovering cash—it’s about protecting relationships, reducing churn, and driving long-term financial health. When collections is treated as a strategic lever rather than a tactical afterthought, it becomes a powerful tool for building customer trust and ensuring cash flow predictability.
For CFOs and CAOs, the path forward is clear: stop viewing collections as a downstream, isolated process and start treating it as an integrated, insight-driven function that shapes your customer experience and your revenue outcomes. The opportunity is not just to collect faster, but to collect smarter—with empathy, with foresight, and with the full context of each customer relationship.
By breaking down silos, modernizing your approach, and empowering your AR teams with the tools and visibility they need, you’re not just solving for unpaid invoices—you’re strengthening your company’s financial foundation for sustainable growth.
Because in the end, collections done right isn’t about chasing payment. It’s about building trust that pays dividends—month after month, renewal after renewal.
To learn more about Zuora Collections, please visit here.