At 83 million, Millennials are now the largest population segment in the United States, surpassing Baby Boomers by 8 million. Born between 1981 and 1996 (ages 22-37 in 2018), this younger generation is upending the way businesses communicate with, attract, and retain Millennial customers. They’re tech savvy, crave instant gratification, and place a higher value on experience over price. Those demands carry over into the way businesses approach their collection processes, too. While existing accounts receivable management strategies like letters series and phone calls are effective when collecting from Baby Boomers and Generation X, Millennials present new challenges for collection teams.
We offer up 5 things to consider so you can collect accounts receivable more efficiently and successfully from Millennials.
- Tech-centered, on-demand solutions drive results
Largely prompted by a growing reliance on smartphones, most companies—and even higher education institutions—are investing in more tech-centered communications and advertising. These same principles should apply when trying to collect a debt. Enabling chat on your website, using email to send and receive requests/back up documentation are just a couple of methods to help shorten the collection cycle, build trust with Millennials, and get over that initial hurdle of making contact to discuss the past due account.
- Focus on relationship-based collections practices
Though more Millennials are formally educated than their predecessors, many still lack the financial literacy to manage their money properly. It’s a big reason why nearly half of all Millennials are 90 days past due on at least one of their bills.
This financial learning curve makes it difficult for them to stick to repayment plans or even to fully understand the pros/cons of each repayment option they’re presented with. Student loan repayment is a classic example. Because of this lack of financial literacy, collections representatives now need to take on a financial counselor role to help educate each consumer to ensure they understand their financial obligations, what their options are, and that they have all the information they need to make an informed decision about how to proceed.
- Provide effortless account management options
74% of Millennials have reported preferring self-serve options. Things like FAQs on your website, virtual interactions via chat and text, and online portals to make payments and pull account history are a few examples. There are many hypotheses related to this phenomenon. It could be that this age group reports higher levels of anxiety and stress. It could have something to do with their lack of interpersonal skills because they’re used to interacting online versus in-person. Whatever the reason, Millennials want to be in control of their account management and be able to troubleshoot and research issues on their own before calling support.
- Update your skip tracing process
One of the hardest parts of the collection process is tracking down consumers, but Millennials prove to be increasingly challenging. For one thing, a 2018 survey reported that 32.1% of Millennials live at home with their parents/legal guardians. Pair that with the fact that Millennials that live on their own are more likely to rent than own while almost exclusively using cell phones over landlines, and you’ll see that finding these consumers becomes extremely difficult. A typical skip tracing process will yield very little.
Being proactive at the beginning of the relationship can pay big dividends into the future. For example, obtaining permission from consumers to communicate via text and email during the buying process helps you stay top of mind not both during the buying process and when payment is due. When getting that permission isn’t possible, leveraging social media, switching to more advanced internet searches, and using scoring models to prioritize your efforts can garner better results.
- Leverage electronic reminders
Though this is technically related to #1, it’s an easy win that’s often overlooked. Pairing Millennials’ love of technology with their lack of financial management skills, including electronic reminders—particularly text/SMS—in your communication toolbox ensures payments are received on time. It also prompts consumers to be more proactive and reach out to you if issues arise. This means less time following up on missed payments while creating more predicable cash flow. Just make sure you have the proper authorizations in place to communicate via text and email.
But this same technology can be leveraged in other ways once the consumer is back in good standing, such as discount notifications and new product announcements.
Overcoming these challenges requires some service flexibility, a commitment to technology-driven communication, and an emphasis on financial literacy. Making the changes that appeal to Millennials now will help prepare companies for Generation Y, who are more tech-focused and struggle even more with money management as they enter the workforce, build credit, take control of their finances, and continue to redefine accounts receivable collection.
Past due A/R dragging down your bottom line? Learn more about Windham’s accounts receivable management solutions.
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