B2B payments are a breeze!” Said no one ever… Unfortunately, many American small and medium-sized businesses (SMBs) today are plagued with late Payment Collections – more than ever before – a complete nightmare for managing their working capital and cash. A 2022 study by the accounting platform Xero revealed that SMBs’ day’s sales outstanding averaged 30.6 days, up 0.6 days from August and at an all-time high in recent two years.
It doesn’t take a lot of effort to figure out what issues such a high DSO can bring with the most troublesome being the need to divert your workforce’s precious time (and money) towards tedious collections activities instead of pursuing more sales and growth.
To collect payments faster, businesses can pursue several different tactics, and the correct combination of strategies might just yield the best results.
Here we go with the Strategies for Faster Payment Collections!
Accurate Invoicing Procedures
This includes having the correct items billed for and sent to the clients in an easy-to-access fashion. Small businesses like local fitness studios, dental clinics or even professional services providers could greatly benefit from automated invoicing since manual entries and transaction recording can be prone to a lot of errors and throw clients off.
Frictionless Payment Methods
Once the client receives an accurate invoice, the payment process should be as intuitive and frictionless as possible. Picture the client opening your invoice and visiting your (e-commerce) payment portal. There are two thought processes that come to mind at the checkout counter. The first: a customer would see payment options with a card, ACH, Apple Pay, and PayPal.
If you have it all, bravo! You get paid. Here’s the second thought process: If you don’t have their preferred method, that’s an issue for another day in the customer’s mind…
Customer-Friendly Messaging
This can be a very strong yet underrated tool. According to a Dun & Bradstreet report, in order to encourage taxpayers to pay taxes on time, the British Tax Authority tried printing messaging such as “Nine out of ten people pay their taxes within the deadline.”
They thought that the messaging would help because as a taxpayer, a citizen might be less inclined to be that one odd person who doesn’t pay before the deadline! Interestingly, it worked and the payment rate supposedly improved by 5%.
Early Payment Discounts
Granting discounts is another common way to offer an incentive for customers to pay early. In today’s inflationary environment, every business is looking for a way to pinch pennies wherever possible. If paying early yields their savings, it could be the logical option for their business.
Flexible Payment Plans
Payment plans are a substitute for cash discounts. Identifying which customers could use a flexible payment plan spread across milestone payments or other such structures can also help businesses charge extra for their products or services while making additional revenue.
Automation of Payment Follow-Up Processes
Automating this process can help businesses reduce labour costs and manual operational efforts. These reminders could be sent via a multitude of platforms, and it is important to focus on the right platform to catch the late-payers attention – whether it is emails, Whatsapp, iMessage, or SMS – that’s why it’s important to meet customer’s right where they are.
Customers are busy running their own businesses; it could be a gentle nudge that pops up as a text notification on their phones that does the trick. Just reminding customers to make the payments may not always be enough – embedding “pay now” buttons or links to payment pages along with the invoice and reminder can help create a seamless experience for customers, increasing the chances of them paying sooner.
Organizations wishing to improve their financial performances might like to use the above strategies to boost payment collections. Adopting personalized communication methods implementing flexible payment alternatives and streamlining collection operations can ensure a strong basis for success.
Additionally, ongoing evaluation and adjustment in response to changing consumer and industry demands can guarantee long-term effectiveness. B2B businesses can sustain growth by adopting these tactics that streamline the collecting procedures and strengthen customer relationships.
Collecting payments from customers can be a headache, but it doesn’t have to be. Not if businesses learn to be as creative in their AR processes as they are while marketing their products and services!
Have queries comment below!
Frequently Asked Questions
How to improve collection process?
Payment reminders should be automated, and personalized incentives should be offered to promote fast payments, decreasing human follow-ups and enhancing overall collection efficiency.
Identify patterns, optimize payment collection tactics, and personalize customer interactions using sophisticated analytics and data-driven insights, leading to increased conversion rates and improved cash flow.
Is automated payment collections safe?
Automated payment collections can be safe if proper security measures are implemented, such as encryption and tokenization, to protect sensitive customer data during the transaction process.
How to automate collections process?
Integrate a strong payment gateway or API into your system to handle automatic recurring billing and payment reminders and employ customer relationship management (CRM) solutions to monitor and track payment statuses and customer contact.
What are the benefits of automated payment collections?
Automated payment collections benefit organizations by increasing efficiency, accelerating cash flow, improving accuracy, and streamlining the customer experience. They minimize the need for manual processing, speed up the payment process, lower the danger of human mistakes, and provide several payment choices, recurring billing, and personalized reminders. These features assist firms in keeping accurate financial records, avoiding reconciliation errors, and improving overall financial management.
