Tag: small business

5 ways to encourage timely customer payments

By on February 21st, 2020 in Industry Insights

Expanding a small business requires a consistent and a steady, growing cash flow. Especially in the early stages of growth, a single, large payment or several smaller payments being delayed could mean the difference between keeping your doors open and closing up shop. 

Your consumers may delay or cancel their payment for any number of reasons: a more urgent financial need arose, they had a disagreement with you about your product or service, they simply forgot to pay, or they adamantly refused to pay for no reason at all. Navigating these situations with your customers can be a challenge and can take time and valuable resources. You have to consider:

  1. How much effort you’re willing or able to put into pursuing payment
  2. How much time you will spend on individual accounts
  3. Whether or not you’re willing to damage a customer relationship (or even lose them as a customer) to secure payment

Unfortunately, there is no right answer to these questions, and your business’ response will vary from case to case. 

Not everyone will pay what they owe

As delayed payments begin to pile up, many small businesses will begin to try to collect on these payments themselves, and the outside options are often limited due to traditional agencies having account volume or account value minimums. Traditional agencies are also seen as greedy, uncompromising, and even sometimes threatening according to a study published in the Journal of Business Ethics. You may only see 50% of whatever they are able to collect, and then also lose out on your customer relationships.

Some customers won’t pay. Period. Newer digital debt collection strategies can help to collect on these accounts and even build up your business’ reputation with consumers, but before you commit to using a 3rd-party collection service, there are some steps you can take to get closer to 100% payment rates! 

1. Have a clear plan for offering credit 

Negotiate payment terms in advance, write them down, and limit how much risk you take on each transaction. It can also help to adopt pre-paid models whenever possible and require a payment instrument before you let customers use your product. 

Your risk team should also be wary of newer customers without an established credit history. If you see a customer start using your product or service and they run up a significant balance in their first few days or weeks, monitor their account carefully. If you run an eCommerce business or a marketplace, frequent and aggressive purchasing sprees from new customers are a major red flag and should be examined before they become larger issues.

2. Charge and invoice promptly

By issuing your invoice or charging a payment instrument immediately following the completion of a job, you can secure payment without leaving room for evading payment.

Beyond that, you can build a (preferably automated) process for following up on chargebacks, outstanding balances, or invoices early and often. There is a careful balance between “often” and “too much” though, so be careful as you set up your contact cadence. Even if you don’t get paid on time, keeping yourself at the top of customers’ minds increases awareness and prepares them to negotiate payment terms when they’re able.

3. Make payment frictionless

Keep a payment instrument on file for your customers and verify it with a $0 authorization. You can also expand your available options and make it easy to set up multiple forms of payment; the more backup payment options you have on hand, the better your chances of completing payment. 

4. Talk to your customers like people

A few stray consumers may actively or angrily refuse to make a payment, but most of your customers want to stay out of debt. If you approach every delayed payment in this way, you can approach payment (and collections) with human in mind, and you can end up retaining a valuable, long term customer.

Customers that you work with may be able to provide invaluable feedback to your team’s processes. Make sure to follow up and talk to them!

Your small business’ goal with receivable management isn’t only to prevent late paying customers, it’s also to retain positive relationships with the most valuable ones. Don’t let a temporary situation ruin a beneficial long term relationship.

5. Prepare an escalation structure

Investing in preventing late paying customers can pay dividends to your bottom line, but retaining some expert help in the event you can’t collect on a delinquent account can be an effective strategy as well. Your risk team may be experts themselves, but accounts recovery is a complex industry to navigate, and if you don’t plan on building a full, first-party collections team in-house, you can form connections with other agencies. 

Having a small business collections partner as a last resort also increases your chances of recovery by informing customers that a delayed payment will likely move to collections. Consumers often recognize that having an account in collections can damage their credit scores and will do their best to pay if they are able.  

It’s not easy to prevent customers from missing the occasional payment, but by following a thorough process you can resolve delayed payments before they can damage your business. 

If delays begin to grow out of hand, you can always reach out to a digital debt collection agency like TrueAccord! Let our team know if you have questions.

Why customer feedback is so important for your small business

By on January 30th, 2020 in User Experience

Everyone knows that customers are the backbone of a business; if people don’t use your service or buy your product then you won’t have a business for very long. In order to solve this problem, companies often work to bring in as many new customers as possible, but you can’t forget to nurture relationships with consumers that you’ve worked with in the past. 

According to Adobe, 40% of eCommerce revenue comes from returning customers which make up only 8% of total visitors! That number alone should inspire you to get out and talk to your old customers and figure out what they think, but there are quite a few more reasons you should cherish customer feedback and use it to strengthen your company!

Building brand promoters

The omnipresence of social media means that consumers that are excited about your company will shout from the digital rooftops to endorse you. Unfortunately, the power of social sharing also means that the opposite is true: if a person has a particularly negative experience with your brand, they will spread the word around fairly quickly. 

Properly managing customer feedback can dramatically improve your brand’s reliability. A Net Promoter Score measures customer’s satisfaction with a business by asking: “how likely are you to recommend this (product/service) to a friend?” Customers that rate your business at a 9 or a 10 are considered promoters and are your best friend when it comes to spreading the word about your brand. 

Maintaining a high NPS score is challenging, but by focusing some efforts on gathering and listening to customer feedback, you can gradually build effective, organic branding that sets you apart from your competition!

If maintaining customer relationships is so important, you may be hesitant to try and collect on debts for fear of negative feedback. But digital debt collection solutions can support your brand and your bottom line!

Incorporating feedback and iterating

Not every review will revolutionize your business. If you take every negative review to heart, you might start to feel a bit down on yourself, but by analyzing customer feedback in aggregate, you’ll start to see patterns emerge!

These patterns won’t appear overnight, and even some patterns may not give you the direction you’re looking for (it is still your business after all). That said, if you have dozens of customers asking for a new feature or piece of content, imagine how many more customers want the same thing that aren’t asking!

By listening to customer feedback and building new tools that your customers are looking for, you can demonstrate that you listen to them and further improve retention. Plus, incorporating these changes into your customer lifecycle can pay big dividends! 

Promoters will continue to support your brand, bring in new customers, and in the long run, they will continue to spend more as your brand relationship improves. A survey by Bain & Company shows that customers actually spend more in months 31-36 of their relationship with a brand than they do in the first six months.

Creating a self-sustaining system

Feedback helps your business to grow and meet the ever-expanding needs of your market. If you don’t listen to your customers and build in a vacuum, you may soon realize that you were not solving the root of a problem. This isn’t to say that every customer suggestion or idea is the right one for your business, but if you take the time to listen to your customers you’ll build their trust and might just find the next right step. 

Tips for hiring a debt collection agency for your small business

By on January 16th, 2020 in Industry Insights

In any industry where money is exchanged, debt is an inevitability. For small businesses, even small transactions can add up quickly and late payments, delinquent accounts, and chargebacks can start to bury an otherwise thriving business. This is where a debt collection agency can help your business succeed. 

Recovering payments on otherwise lost accounts probably sounds great, but let’s do some research before you get started! Here are a few things to consider when you begin looking for a collection agency for your small business.

1. Where can they collect?

Collections agencies can provide financial services to businesses ranging from those in their local area to companies across the country, but it’s important to validate that they can operate in your state! Local collectors may not have the licensing authority to collect across state lines. 

Larger collection agencies may also work across the country and even specialize in collecting certain types of debt for a given industry, such as point of sale transactions, credit card, rent to own products, loans, etc.

2. What industries do they serve?

The needs of B2C (business-to-consumer) businesses are dramatically different than those of primarily B2B (business-to-business) business lenders or tech start-ups. Collectors that specialize in specific verticals can ramp up and start collecting effectively, faster because of their familiarity with consumers in that space. Don’t be afraid to ask a collector for their experience working with other businesses like yours!

3. Are they legally compliant?

Beyond the local and state level access, federal regulations play a large part in a collector’s operational ability. Keep your business safe and verify that the company you’re interested in working with has a comprehensive compliance management system.

A proper system will be designed to be in compliance with the Fair Debt Collection Practices Act as well as other state and federal regulations.  Also, ask what preparations the company has made for compliance with the upcoming Consumer Financial Protection Bureau’s newly proposed rules.

When you begin your research into new agencies, consider visiting their Better Business Bureau page or looking through their Google Reviews. Consumers that have had particularly negative or even legally questionable experiences with the business may help you to recognize red flags before they become an issue for you and your team.

4. What is their pricing structure?

The price on any purchase for your business can make or break the decision to invest in a new product or service, and finding a debt collection agency at the right cost is no different. Most debt collection agencies will be priced in one of three ways: flat fee, contingency, or a hybrid model. 

  • A flat fee is a one-time service payment that coincides with signing a contract and will vary depending on the volume of accounts that are being collected on.
  • A contingency payment plan is a performance-based payment model where the collector only profits from the accounts they are able to collect on. Signing a contingency contract will typically outline the percentage that they will collect per account and may change from portfolio to portfolio. 
  • A hybrid model is often a custom solution that begins with a flat fee contract and expands out to accomodate more accounts if the collector is exceeding expectations. 

5. What communication channels are they using?

The debt collection industry is undergoing a massive change, and many collections agencies are struggling to adapt. Call-based collections has been the norm for decades, and a large percentage of debt collection agencies still rely on sending letters (91%) or making phone calls (89%) as their preferred contact channels. 

Unfortunately, these channels are no longer the ideal channels for consumers. Collection agencies that embrace digital channels (email, SMS messaging, etc.) are more likely to reach consumers when and where they like to communicate, and help to humanize the collections experience.

If you’re interested in learning more about the future of communication strategies in collections, you can read here!

Working with a debt collection agency may seem like a risk, but finding the right solution for your business can mean recovering revenue that would have otherwise been entirely lost. Just make sure that your new partner is the right one for your business. What other questions do you have about what it means to work with a collection agency? Let us know!