Motivating Your Customers To Pay On Time
It’s one thing to get customers to sign off on invoices, but an entirely new challenge can arise when it is time for them to make payment. Some customers might be holding off on payment so that they can keep liquid capital in their hands as long as possible . . . but others might simply consider paying your company’s invoice a low priority. If they don’t face a serious consequence for non-payment (for example, having their electricity shut off), how can you encourage your customers to pay their invoices on time?
Deliver Invoices To Your Customers Early
If customers have multiple ways to make a payment, it will likely increase the speed in which they pay. Think about a business that only accepts payments by phone or mail. The customer will have to reach out during normal business hours or send their mailed-in payment days early to ensure it gets processed on time. However, if the business offers 24/7 payment options, like an online portal, customers can pay anytime at their convenience. In addition, offering electronic payments, like credit card and ACH, give customers immediate ways to pay versus a paper check, which typically takes 3-4 business days to arrive in the mail.
Make Sure To Send Out Payment Reminders
Our second recommendation is that your payment reminders should be sent out proactively. Determine how soon after your service/sale the initial bill ought to be sent, and then plot out how many days later each follow-up reminder should go out. Having a clear policy, standardized format, and a step-by-step plan means you won’t have to continually be making judgement calls about whether it’s time to follow up again.
One easy way to do this is to schedule automatic reminders ahead of time, populating them with the relevant information. Also be sure to customize your reminders: you can attach invoices, include payment links, and tailor your wording to match your relationship with the customers. You can also customize your wording to reflect how overdue the customer’s payment happens to be. For example, a message about an invoice that will be due in two weeks might sound a bit less urgent than for one that’s already two weeks past due.
That is one simple function to automate, but there are many more. It is clear that automation has many benefits. Firms that rely on manual processes to prioritize their collections take 30% longer to follow up than firms that use automated methods.
Provide A Quick and Easy Payment Process
Since there are few people who actually enjoy paying their bills, it’s best to be aware that there may be a certain level of resistance to the process. One way to minimize this natural resistance is to make bill payment as convenient as possible.
One obvious time saver is to provide credit card payment options. According to a study done during the pandemic, 66.5% of companies surveyed are receiving more payments digitally. Since credit card payments are processed in real time, your customer finishes the task efficiently, and your company knows that funds are on the way.
Whatever forms of payment methods you offer, take note that the payments industry is changing rapidly. A recent survey of 8,600 consumers found that 48% of respondents listed digital wallets as their preferred payment method.
One option for providing customers a digital way to pay and save their information on file is to set up a customer payment portal, where clients will be able to log in online to settle their accounts 24/7. Another option is to provide them payment hyperlinks where they can click to enter payment information on a secure payment page.
Address Customer Concerns As Soon As Possible
Miscommunications in business relationships can be awkward, but it won’t benefit anyone to let a disputed invoice (incorrect amount, wrong item, et cetera) sit gathering dust. This is the sort of clerical error that shouldn’t take much time to fix, but merchants will sometimes delay the process. If a customer’s invoice has an error, address the mistake, issue a new invoice, and communicate with the customer about it as soon as possible. The sooner you work together to resolve the dispute, the sooner that amount of money will appear on your company’s balance sheet.
AR Improvements Pay Off
Don’t overlook possible updates to your Accounts Receivable processes! Whatever methods you implement to encourage on-time payments, AR system improvement is time well spent. Speeding up your cash flow might provide just the right resources needed to reach your company’s goals.
2 Mastercard New Payments Index: Consumer Appetite for Digital Payments Takes Off. Mastercard. May 2021
3 B2B Payments Innovation Readiness Report. PYMNTS.com. September 2020
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