We all want our customers to pay on time, so we can pay our own bills — payroll, equipment vendors, etc. So how do we make that happen?
1) Push Autopay – Get your customers to set up their recurring charges with some method of autopayment, like checking debit (ACH) or credit card. Yes, there’s a cost for this, but it’s almost always worth the tradeoff—never again having that customer on your aging report. ACH is cheaper, as banks charge a modest transaction fee versus a 3-4% fee for credit card charges where the card is not swiped.
2) Update Expiration Dates – Check expiration dates for credit card autopay accounts, and pro-actively get the new date before there’s a risk of card rejection. Better yet, try to get them to change to ACH, since there’s no expiration dates on bank accounts.
3) Due On Receipt – For service and installation invoices, we’ve found that printing “Due On Receipt” prompts faster payment than, say, 15-day terms. You still need a due date in your receivable management software, so you can properly track your aging. It also helps to offer a convenient online payment option (e.g. Alarmpayments.com).
4) Prompt Handling of Service Issues – Often, delayed payments are the result of service complaints, like “my system isn’t working.” Staying on top of service requests will reduce excuses for non-payment.
5) Quick Follow Up with Past-Dues – Give customers a courtesy call when they pass 15 days past due to make sure they received the invoice. On that call, update any name or address changes to avoid future delays. Get an email address and email a copy of the invoice; having emails is becoming essential for connecting with your clients beyond collections work.
6) Defined, Consistent Program – Put in place a clear, consistent calls and letters process…and follow through with what you say you will do. As in raising kids, don’t threaten to do something and then not do it. Call, at 15 days, and then send a letter if payment isn’t received by a target date. Call again at 25-30 days and send a statement. Your collection letters #2 and #3 should be worded more strongly. The final request (typically at 75 – 90 days past due) should require payment by a certain date OR discontinuation of service—follow through on that date. Good account management software should allow you to track your activities and batch print letters for the collections process you outline. If need a template, call Cornerstone…we can email you a sample timeline and flow chart for your in-house collections program.
7) Late Fees – Consider using late fees, but look at them as a bargaining chip. They should be an incentive to pay faster, not a profit center. Make the late fee a $3 or $5 minimum per 30 days past due, enough to get someone’s attention. You can also set a percentage, which would apply to larger dollar past due amounts. Waive late fees liberally… remember you want a long-term customer who pays you faster. You shouldn’t lose a customer because they refuse to pay a $15 late fee.
8) Collection Agency – Consider using a 3rd party collection company for the final collection letter that says ‘pay now or face disconnection.’ We find that many chronic late pay customers may ignore company-generated letters, but quickly cut a check when they receive a collection letter from a true Collection Agency.
More than anything, keeping you receivables under control requires consistent billing, a well-defined follow up process, and giving you customer all possible ways to pay—by check, ACH debit, Visa, MasterCard, Discover, American Express, and online through a secure payment portal. If you’d like to explore these tips further, provide your own ‘helpful hints’, or have a unique situation that you’d like to run by us, feel free to call: (888) 629-8101 x __.