Collection of receivables can be a nightmare in the life of a finance professional in a mid-market company. Debt recovery is one of the most crucial components of the process of securing revenue.
Chances are you have dealt with your fair share of delinquent accounts and are aware of the struggle to get customers to make payments past the due date. You also know delinquency on the part of customers hurts your cash flow, forecasts, and profit goals.
And now, more than ever, you need to integrate new approaches into your invoicing and collections strategy to get your clients to pay on time. A recent industry survey reports about a thirty-eight percent decline in collectability since March 20201.
Here are some tips that will help
Clear communication is key when it comes to payment terms. It’s best to follow the standard prevalent in your industry but if you choose to follow different payment terms, briefly mentioning why the terms are fair sends a message that you expect to be paid on time.
A recent study by Xero found that on average, customers make their payments about fourteen days late, industry regardless2. Hence, it’s a good idea to account for the delay while specifying your payment terms. For instance, if you want to get paid in thirty days, it is best to specify fifteen days in your invoice and email.
Next, words in your communication have to be contextual to make it effective. Many companies continue to use age-old terms such as; ‘Net 30’ or ‘Net 15’ in their communication and invoices. Studies have found that including a clear call-to-action can rack up the number of invoices that get paid. Consider ‘Please pay within the next 15 days instead of ‘Net 15’.
Never delay sending your invoices. Customers often subliminally perceive slow invoicing as relaxed adherence to payment terms or the first sign of high tolerance towards slow payments.
Secondly, the traditional accounts receivable process of creating and issuing invoices manually often involves delays and errors. Amid all the things to do in a day, sending invoices often gets relegated to the bottom of the list amounting to expensive delays.
Another common issue that causes significant delay is that of incorrect invoice amounts. There’s growing recognition of the benefits of automating the entire accounts receivable process among small and mid-sized firms.
Modern accounts receivable software solutions offer the option to send accurate invoices, prioritize accounts, send invoices automatically to certain accounts, and more. The software also helps you mitigate problems associated with paper-intensive old-world processes. You can also automate payment reminders and never let due invoices completely slip off your customers’ radar.
Your customers want to save money. Why not enable them to do so and ensure timely returns? It is a good idea to offer incentives to encourage customers to pay early.
When you impose a penalty for late payments, it offers your customers the option of delaying their payments and paying a low penalty as opposed to incurring high credit card charges. With modern AR solutions, you can easily set rules to reward customers who pay early.
Delays can also happen at customers’ end. Your customers go over invoice amounts, check records, approve invoices, resolve disputes if any, and then make payments. Multiple unpaid invoices may take longer and worse yet, cause your customers to miss out on a few of them.
AR solutions make it easy for your customers to manage their invoices and transactions with you. Customers can raise disputes without having to exit a customer portal, make payments, and much more. Customer self-service portals not only improve the success rate of your invoice payments but also provide more autonomy to your customers.
Timely invoices, follow-up rigor, and all other essentials mean little if you don’t get the last mile right. Imagine a customer has done all her checks and is ready to make a payment but doesn’t find the option to pay using her credit card.
In all likelihood, she’d schedule the payment for later at this point. This delay in securing your payment is one you could easily avoid with solutions that offer flexible payment options from within a customer portal.
Provide options such as ACH, credit card, net banking, and also choose a provider that offers multi-channel portals and payment options to enable your customers to check past records or make payments while on the move.
Lastly, you need a different communication strategy for customers that do more business with you than those who have lesser dealings. You want to give the benefit of the doubt to customers who default once but want to adopt a different approach for customers who are invariably late.
Some customers prefer receiving invoices by email, some others simply want them uploaded to their accounts payable portals. And of course, not all customers are equally creditworthy. So, how do you deal with the different styles, modes, and forms of communicating with these customers for the best outcomes?
Taking into account all the myriad parameters to get your customers to pay and also strengthen the relationship is critical not just for debt recovery but for business in the long term. And this is where modern AR solutions can help your collections analysts wear the customer service hat with aplomb. Key information and analyses sliced and diced as per aging bucket, collections task, credit-risk, and other parameters empower your analysts to converse with clients effectively.
Invest in the right tools to increase the efficacy of your collections and optimize the time, effort and resources used.
The RadiusOne A/R eInvoicing and Collections app is designed to serve the unique needs of small and mid-sized businesses. From getting a prioritized worklist to equipping them with accurate information, the eInvoicing and Collections app improves every part of the invoicing and collections value-chain.
The solution has helped leading small and mid-sized businesses reduce past-due invoices by 75%, on average. Clients have reported an efficiency improvement of over 120% with the solution’s effective automation engine, powerful analytics, and a user-friendly portal that allows collections analysts to make calls, send invoices, set reminders, automate follow-up emails, and do much more.
Want to learn more right now? Take a look at this short video about the solution.
HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.