How Microsoft Copilot Helps Reduce Bad Debt in ERP

Here’s a question I hear a lot: Can Microsoft Copilot truly help predict which customers won’t pay on time?

Well, it’s a lot like weather forecasting. If you’re only looking out the window, you’ll be surprised by the thunderstorm.

But if you’ve got radar, you can plan ahead.

In the same way, finance teams relying on spreadsheets are “looking out the window,” while those using AI in their ERP finally get radar—clear, data-driven visibility into payment risk.

This blog is the first in a three-part series exploring how AI within Dynamics 365 Business Central reshapes collections.

In Part 1 below, I’ll focus on how AI minimizes bad debt.

Part 2 will dive into financial outcomes like reducing DSO and boosting revenue, while Part 3 will highlight efficiency gains such as reducing manual workloads and accelerating order-to-cash cycles.

Let’s get started!

Why Bad Debt Is More Than a Line Item

Bad debt isn’t just an accounting nuisance—it’s a drag on growth and cash flow. It eats away at profitability, limits access to credit, and stifles growth capital.

The problem is that many AR teams are still chasing payments reactively, by calling too late, following up inconsistently, and managing risk only after balances go delinquent.

That lag time is costly, and finance teams need a smarter, faster way to get ahead of it. Research shows that accounts receivable automation can reduce bad debt write-offs by as much as 15% and shorten DSO by up to 22%.

That’s no small line-item adjustment—it’s a financial lever that keeps cash flow strong.

Beyond the direct hit to cash flow, bad debt also creates ripple effects that can undermine strategy.

Investors and lenders view high levels of overdue receivables as a warning sign, which can raise borrowing costs or limit access to credit altogether.

It also restricts the ability to reinvest in growth, whether that’s hiring new staff, upgrading technology, or expanding into new markets.

In short, every dollar lost to write-offs is a dollar that could have fueled future opportunity.

Can AI Predict Bad Debts in Accounts Receivable?

The short answer: Yes. AI tools can spot patterns humans often miss.

By analyzing accounts receivable history, customer payment behaviors, and external market data, AI can flag at-risk invoices early so teams can intervene before balances go delinquent.

Think of a client who consistently slips into the 60- to 90-day bucket. Instead of discovering this at quarter close, AI would surface their account for attention weeks earlier.

By applying AI, finance teams move from reactive collections to proactive payment risk management, reducing both the frequency and size of write-offs.

How Does Microsoft Copilot in Dynamics 365 Help Forecast Customer Payments?

This is where Microsoft Copilot shines. By embedding predictive intelligence directly into Microsoft Dynamics 365 Business Central, AR teams gain more than just reminders—they get real insights.

Within Business Central, Copilot can gain insights from predictive tools like the Late Payment Prediction app extension, which uses historical data to identify invoices at risk of being paid late.

That means AR teams spend their time on the right accounts at the right times, instead of chasing everyone equally.

For finance leaders, this translates to more accurate forecasting, fewer unpleasant surprises at quarter close, and better visibility into ways to improve cash flow.

For example, imagine a collections manager logging into Business Central on Monday morning.

Instead of sifting through spreadsheets, she opens the Late Payment Prediction app extension, which highlights overdue accounts and predicts which customers are most likely to miss deadlines.

That shift—from reactive spreadsheet work to proactive, AI-driven insight—saves hours each week and ensures effort is directed where it matters most.

Microsoft explains it best: Copilot empowers collections teams with AI-driven insights that help them act before problems spiral.

Which Customers Are Most Likely to Delay Payment Next Quarter?

This is a question I hear frequently from finance leaders.

While Copilot itself doesn’t yet deliver crystal-ball style answers about which customers will pay late, the Late Payment Prediction app extension in Business Central provides similar insight at the invoice level.

The app analyzes historical patterns and customer behavior to predict which invoices are most likely to be delayed, giving AR leaders a clearer view of where to focus their outreach efforts.

For more perspective on how ERP strategy shapes collections, see my earlier blog on ERP with Built-In Subscription Pricing.

How Can AI-Powered Credit Risk Analysis Reduce Bad Debt?

Traditional credit checks are static, offering just a snapshot in time. AI-powered credit risk analysis, on the other hand, taps into ongoing behavioral and transactional data.

This allows businesses to extend credit with confidence, or even adjust terms before exposure grows too risky.

The result is fewer defaults, healthier customer relationships, and smarter decisions about high-risk accounts.

And it’s what turns credit and collections management software into a true strategic asset, not just an afterthought.

What Are the Benefits of an AI-Enabled ERP System?

AI-embedded benefits in ERP extend beyond collections:

• Efficiency: Accounts receivable automation software eliminates repetitive tasks like sending reminders.

• Insights: An automated collection system surfaces patterns in customer behavior that humans might overlook.

• Visibility: CFOs gain a clear view of at-risk accounts, while AR leaders can direct staff more effectively.

Think of this blog series as a roadmap:

• Part 1: Minimizing bad debt.

• Part 2: Financial outcomes like reducing DSO and boosting revenue.

• Part 3: Operational efficiency through automation.

Why ERP-Payment Integration Matters

AI predictions are only as good as the data they analyze. If payment information doesn’t sync with your ERP, insights will always lag.

Without integration, gaps between ERP and payment systems weaken accuracy and slow action.

ERP payment integration ensures payment activity updates instantly, fueling automation and precision.

That’s where USTPay makes the difference, aligning ERP and payments to unlock the full value of AI.

Learn more in my earlier blog: Don’t Risk It: Ensure Your Payments Processor Knows Your ERP.

Turning Collections into a Proactive Advantage

Bad debt may always exist, but it doesn’t have to be a black hole in your books. With Microsoft Copilot inside Business Central, finance leaders finally have a way to predict risks, prioritize outreach, and prevent problems before they hit the bottom line.

AI in collections is still evolving, but early adopters are already seeing measurable gains.

Companies that embrace Copilot and connected ERP systems now will be better positioned to adapt as new capabilities emerge—whether that’s smarter automation, deeper credit risk analysis, or tighter integration with payments.

And that’s where USTPay comes in.

USTPay’s Role in Smarter Collections

At USTPay, we don’t just implement technology, we guide strategy.

My team and I work alongside finance and IT leaders to align AR strategy with technology investments. The outcome is reduced write-offs, stronger cash flow, and more confident teams.

When ERP, payments, and AI come together, companies gain a collections process that is proactive, not reactive.

Ready to explore how AI can reshape your collections process? Reach out for a consultation.

About Wade Tetsuka:

Wade Tetsuka is a visionary leader with over 15 years of experience as President of U.S. Transactions Corporation, where he has helped transform the landscape of B2B merchant services.

His deep expertise in finance, coupled with a keen understanding of compliance and client management, has positioned UST–a leading Fintech company and Independent Software Vendor (ISV) for Microsoft Dynamics 365–as a trailblazer in helping businesses save money and streamline payment processes.

As the founder of Presidential Forum LLC, an exclusive network for C-level executives, Wade fosters thought-provoking discussions that shape industry trends and leadership strategies. His commitment to excellence and forward-thinking approach makes him a sought-after voice in both the Fintech and executive leadership arenas.

Connect with Wade on LinkedIn.