Whether you’re a big corporation or a small business, controlling your accounts receivable is one of the best ways to increase your cash flow. Chasing down delinquent customers is not ideal. Putting aside the fact that you’ve already performed services or delivered goods, it costs you and your team time, money, and resources that you might not be able to spare. Simply turning your past due accounts receivable portfolio over to collections, can build friction between you and your customer base and decrease repeat business.
The best way to resolve mounting past due invoices is not let them pile up in the first place. Let’s look at some of the frequent ways companies keep their past due accounts receivables growing.
1. No follow up
Sending out an invoice or statement is only half the battle. A call, email, or text (as allowed by law and contract) makes sure the invoice has been received and that the charges are understood. Just mailing the invoice is very passive. Even an emailed invoice can get stuck in spam filters or promotions folders. Calling or texting is much more active.
Keep in mind that not everyone communicates the same way. Millennials prefer texting. Baby boomers love phone calls and letters. Mixing up your follow-up channels can increase your chances of getting the customer’s attention.
2. You’re following up, but it’s not timely
Everyone’s busy and it’s easy to forget. When sending out a second invoice, set a reminder to follow up around the time the new invoice should arrive. Following up this way presents a sense of urgency to pay the bill or at the very least to speak with you. Two strategically timed customer contacts are more memorable than just one.
3. Confusing or frequently changing billing policies
Simply put: a customer won’t pay a bill if they don’t understand what they’re supposed to pay and when. Billing policies and payment options should be clearly communicated to customers as soon as they become customers.
Welcome calls for new customers are a perfect solution. It’s a simple way to establish a relationship while also addressing any initial concerns or confusion early on. Plus, you’ll build instant loyalty as you come across as attentive and appreciative of their business. They also set up the expectation that customers can expect regular communications from you, so if their account does go past due, they’ll be more likely to pick up the phone than hit ignore just out of habit.
4. Your customer service needs an upgrade
When a customer feels unappreciated or mistreated, you’re only giving them more reason to pay someone else’s bill first. Long hold times are one of the biggest pain points for customers. It’s the quickest way to show someone you don’t appreciate their time or hard-earned money. Using forecasting tools to predict call volume patterns helps you to properly staff your customer service lines for seasonal peaks and keep customers happy and on the line.
Also important, but often overlooked, is verifying contact and mailing information every time you speak with a customer. Many don’t use those change of address boxes that come with their statements anymore and updating their profile information online is only a priority when they’re looking to get something delivered. It takes no more than a few seconds to verify, but it could save you the time and money spent on sending multiple invoices to the wrong address and tracking down a missing customer.
5. Time-suck customers
Some customers pay late every time no matter what. Others dispute your charges frequently but without merit. A few go dark when you’re trying to reach out to them. It’s often a small percentage of your overall business, but with a quick analysis, you can likely identify your time-suck customers.
Not only do they turn getting paid into something worthy of an Olympic medal, but they’re likely creating more inefficiencies in your collections process and more problems for your paying customers. If your staff is caught up on the phone with them, then across multiple time-suck customers, that could be clogging up your phone lines without any actual revenue coming in.
If you’ve tried everything to get yourself on the same page with them, an alternative would be to outsource these accounts to a revenue management company. They handle situations like this all the time, so they’re more experienced in overcoming payment hurdles and nuanced stall tactics in a respectful but impactful way. Many can handle irksome calls like this for just a few bucks depending on how much volume you send.
Pro tip: Find a revenue management or accounts receivable partner that tailors its call program in such a way that this external team feels like a true extension of your internal team so their service standards and scripts are consistent with yours.
Minimizing past due accounts receivable is a great solution for keeping a healthy bottom line, but achieving it takes work. It’s not necessarily difficult work, but it is thoughtful and active work.