The technical and analytical vision behind TrueAccord is to add data-driven decisions to the communication model in debt colelction. Digital communication enables better data collection, and better understanding of customer behavior patterns. We can collect and observe open, click and browsing patterns that sometimes do more to explain how to engage with a customer than explicit communication. By connecting customer behavior to their mental state, and responding to that state with corrent language, we were able to substantially increase engagement on our collection communication.
Getting paid is a chore, and often one that you don’t plan for. Customers will surprise you with excuses and delays, and those may severely influence your cash flow. So, what are the key things to remember so you can prevent late paying customers?
There Is No Such Thing As 100%
Unfortunately, this is reality – some customers won’t pay. Whether it’s because they’re in disagreement with you, don’t have money or are generally irresponsible usually doesn’t matter – you’ll eventually need to use a trusted third party to get these ones to pay. There’s never 100% payment rate unless you’re not really growing, and can afford to spend a majority of your time managing credit risk and chasing late customers.
So How Do You Prevent Late Paying Customers?
Preventing late payments requires following a structured process to make sure that you remain top of mind for your late customers, dealing with their excuses, and countering them until you get paid. Specifically, pay attention to the following:
Be exclusive with giving out credit. It’s easy to allow customers to pay net plus and get the sale, but you’re not really compensated before the money is in your account. Being too liberal with granting credit, especially on large amounts or with customers who are new to you, can prove detrimental. Beware of new customers, those without a long established history, and ones that try to rush you into large projects and expenses while asking for credit.
Be prompt in issuing your invoice post completion of a job or with following up on late payments. Those who prevent late paying customers are the businesses who keep reminding their customers that they exist, that their outstanding balance exists, and that they expect to be paid.
Be frictionless in your methods of payment. In order to prevent late paying customers you need to be able to charge credit cards, accept wire transfers, and deposit checks. The more payment options you have, the better your chances of getting paid.
Be polite in your communication with your customer. They might not pay you today, but end up being a valuable long term customer if you just work with them through their current situation. Your goal with your receivable management process isn’t only to prevent late paying customers, it’s also to retain relationships with the most valuable ones. Don’t let a temporary situation ruin a beneficial long term relationship.
Be ready to escalate if your demands aren’t met. At the end of the day, you may invest a lot of effort in order to prevent late paying customers, but you are (most probably) not an expert. Sometimes you need external help to get the last mile, or negotiate for you, or just diffuse a loaded situation that was aggravated by emotion. Using a third party increases your chances of recovery even before customers are sent over, just by using them as a “bad cop”. Having that power on your side helps your recovery.
It’s not easy to prevent late paying customers, but following a structured process, a few tips, and using a strong partner can get you paid much sooner than you usually do, and contribute directly to your cash flow. Don’t be afraid to attack this problem head on – it’s critical for your business’s success!
We all want to be paid by our customers as early as possible. While getting invoices out as soon as a job is done and following up to assure payments are two great tips, there actually several design cues that you can include to improve the way your invoice is handled. We’re put together a list of the top 3 invoice design tips that get you paid faster.
Why Do I Need Invoice Design Tips?
Nobody likes paying. We all love buying, but the payment part is the hard part. Because of that, we use any excuse we can to put off, delay or just forget about bills. Correct invoice design and wording leads to lower cognitive load, and to lower objection to paying your bill. After all, you want to be at the top of the pile, where bills get paid.
3 Invoice Design Tips That Get You Paid Faster
The following tips are a result of TrueAccord’s research into communication language that works when talking to late paying customers. Much like handling excuses, you need to know what to say, to whom, and when.
Invoice Design Tip #1: State The Facts
The easiest way to undermine the payment process is to dispute the facts: when was a job done, what were the payment terms, what was delivered. It’s in your best interest to define the facts and set the stage for the demand for payment. That way, you reinforce the value you provided to your customer, and help them agree with the fact that you need to pay. Include a clear statement of work and the breakdown of all related charges, note when the job was delivered, and refer to your signed contract.
Invoice Design Tip #2: Define The Path To Payment
Arguing about method of payment is the easiest way to avoid paying. From “the check is in the mail” to “I only pay via bank transfer”, customers will have multiple excuses to why they can’t pay right here and now. Providing an easy way to pay (via an online form) and a variety of ways to pay (wire transfer, mailed check and so on) will reduce friction and increase your collection rate. Your job is to be able to reply to every “But I prefer…” with a “No problem, here’s how you do it. Please pay right now.”
Invoice Design Tip #3: Instill A Sense Of Urgency
It’s important to make it clear that you expect action from your customer within a limited time frame. Lack of deadlines and generally laid back language will get your invoice tossed to the end of the line. Use bold colors, explain that the customer is expected to act as soon as possible, and add a concrete time frame (“Please pay or contact us to make a payment within the next seven (7) days, by [Date].”) Make sure you are polite but assert the need to act now and make a payment. Add a due date and use contracting colors to highlight important next steps.
You want to get paid for work you already did. Too often, business owners neglect this important function only to find that they did all the work but are not getting anything in return for their efforts. Other business owners aren’t scammers – like you, they’re trying to juggle cash flow and the incoming bills. You need to make sure that you are properly set up to be on top of their mind when they look at that pile.