“Must Have”: Electronic Billing & Payments
According to a 2020 study by National Automated Clearing House Association —the trade organization for the ACH payments industry—respondents cited COVID-19 as a “trigger event for moving customers to a more digital experience.” In other words, having paper-free and touch-free billing and electronic billing options is now a must have.
For security alarm dealers, this means being able offer your subscribers:
- Credit card and ACH/EFT payments on multiple payment dates during a month
- Emailed copies of autopay transactions, to one or multiple email addresses
- A process for notification and easy updating of credit card expiration dates
- A user-friendly online payment site, tied to a subscriber’s invoice(s)
- Instant confirmation of payment when using that site, and automated payment posting
Most security dealers do take credit card payments now, but many don’t offer payment via ACH or some of the automation noted above. It’s not easy to build.
Many of the dealers that come to Cornerstone have set up with a merchant processor, where they keep their recurring credit card transactions. Some have also set up ACH debit processing with a third party processor, or with their bank. Often, they then use QuickBooks or another software program to generate their recurring paper invoices.
The result? 3 or more different systems through which to generate their recurring billing batches processing becomes disjointed and complicated to manage. Part of the problem is that by using, say, a merchant processor to store their recurring transactions, two issues arise. First, they “run” the recurring payments, but there’s not an actual invoice that’s generated for this payment. Second, they then need to reconcile those payment batches, and book the invoices (often after the fact) to their accounting software. If this is also true for their ACHs, it gets complicated and messy.
Good Software Can Help
One of Cornerstone’s big selling points is using our software to organize all this potentially messy activity…and keep it organized forever. In our system, when the recurring batch generates each month, several good things happen:
- ALL the invoice types—paper, credit card, ACH, and email—are created
- The payment posting therefore happens in one place, so very easy to track
- Autopay batches are queued up, based on the subscriber’s payment date chosen
- Because we handle the billing as a service, payments are submitted like clockwork
- Statements to past-due accounts are generated and mailed/emailed automatically
Because this industry has such a large volume of recurring transactions, our software is built to make it easy to manage the autopays…it’s largely automated, saving our dealers time and energy.
Failure Rates & Automated Follow Up
In a perfect world, 100% of scheduled autopays would run and clear, and payments applied to close out the invoices. Sadly, we don’t live in that world. Failure rates for the 2 types of autopays are as follows:
Credit Card autopays: 8 – 12% typical failure rate
ACH debit autopays: 1 – 2% typical failure rate
Dealers that sign up with us do so partly because follow up on these failures is complex, and things often get missed. For them, these become “one offs” that don’t usually have a clear set of follow up procedures.
At Cornerstone, we’ve built a sophisticated software program we call “Autopay”. That software keeps us organized, and keeps all the follow up processes automated. For example, if a card payment fails due to a “lost or stolen” card code, we exclude it from follow up, and leave our dealer a note of explanation. We also switch the customer back to paper billing, so at least they’ll continue to get their invoice. If the reason code is “NSF”, we add the transaction automatically to our re-run file. About 40-45% of the re-runs DO clear the second time. The main point is that this is all taken care of; our dealer gets notes about these failures, and what we are doing to try to get them to clear.
ACH vs Card—A Clear Winner
You’ll note in the section above that the ACH failure rate is a small fraction of the card failure rate. Credit card merchant fees are 2.7 – 3.5% of the transaction amount for ‘card not present’ payments, which include recurring security services payments. By contrast, ACH charges cost between 20 and 75 cents in most cases.
So the winner in terms of cost AND reliability is clearly ACH debit processing. Still, subscribers like getting the points on their card transactions, so credit cards are used nearly twice as much as ACH debit among the subscribers we autobill at Cornerstone. Obviously, credit card points or airline miles are nice but not free—our businesses pay them through the relatively high merchant fees.
COVID-19 represents a perfect opportunity for security dealers to move their subscribers toward automatic payment. We’ve worked with many of our dealers to implement a staged “Going Green” initiative to start eliminating paper invoices and paper check payments. Need some guidance doing this? Even if you’re not a Cornerstone customer, we’d be happy to share with you our recommended process for implement a Going Green push. Just give me a call at 224.577.1197 and we can discuss; I’d be happy to forward a PDF of our process.
Stay well, stay safe!