Business owners looking to get paid faster are right to think about sending automated payment reminders. After all, payment reminders work. But as your business grows, your system of payment reminders needs to change. What worked for your small business with its handful of debtors won’t necessarily work as your accounts receivable function expands.
The fact is, not all automated payment reminder systems are created equal.
Focus on outcomes not activity
The goal here is not to get good at sending payment reminders. The goal is to get paid faster.
Inbuilt payment reminders in your accounting software allow you to generate more activity - you can automatically send payment reminders, or even dunning letters. But then what? Are you confident that your debtor received your email? Can you be sure your debtor has everything they need to understand their debt? Did you get paid?
An effective payment reminder system not only delivers emails, it then feeds back valuable information so you can make better decisions, quickly. As your debtor activity grows, look for a system that:
- Presents a real-time map of your accounts receivable data so you can instantly see the overall debt owed to your business as well as drill down into every debtor’s account.
- Delivers payment reminders to debtors by reaching them in a variety of ways - by email, sms, letter, even fax
- Communicates about the total account, not just individual invoices, so you and your debtors understand the total debt.
Your system needs to give you the big picture as well as the detail
One source of truth for better collaboration
A common pain point in bigger businesses is how to keep track of a growing list of debtors with multiple overdue invoices. You used to be able to rely on Karen in accounts to follow-up every overdue account. But when you have Karen, John and Amy on the job, your expanding team needs to share status reports with each other. That can be hard to do when everyone keeps separate notes, or worse, none at all.
With a team of people sending reminders and making phone calls to debtors, it’s important to have one consistent process, and a central place where all the debtor data lives. Just as you might have upgraded to a CRM for a complete view of customer relationships, your payment reminder system should work as a debtor CRM, and becomes your go-to source of truth, essentially an audit trail to track debtor activity. Your team will work faster once they eliminate multiple spreadsheets and call lists and work from one database that houses a complete history of payment reminders sent, phone calls made, promises of payments and next course of action.
Reminders as collectors
You know the power of a best practice invoice to help you get paid faster. But did you know that your payment reminders can also be optimised to boost your chances of making a collection?
Make a few simple tweaks to your basic payment reminders so that you can immediately improve their effectiveness:
- Send payment reminders from an email address from your business i.e. avoid the payment reminder that looks like it’s system generated from your accounting software; they are too easy to ignore.
- Avoid sending a payment reminder per invoice, instead, send payment reminders by account. This way, you don’t over-communicate with your debtor, you communicate about the total overdue, and you can spotlight the oldest overdue invoice (which becomes increasingly difficult to collect).
For example, you’d include something like: ‘Your oldest overdue invoice is now 27 days overdue and your total overdue amount is
$4, 675, made up of the following invoices…’ If you can auto-attach copies of the invoices mentioned, even better.
- Collect money online via a Pay Now button. The most convenient payment method you can offer your debtor is the option to immediately click and pay. A Pay Now button on your email or SMS reminder funnels your debtor through a simple checkout process then and there.
More professional communications
Every communication from your business - including payment reminders - is a reflection on your professionalism. As your business matures, so should the quality of your communications to customers. You’ll want your branding, tone and language evident in your payment reminders. Not only will your debtors instantly understand the communication is from your business, you will differentiate yourself from the thousands of companies sending generic payment reminders.
An escalating pathway
A key reason that big businesses are good at collections is their capacity to keep pursuing a debt until the customer pays up. As you grow, your payment reminder system should support your collection efforts with more services. ezyCollect, for example, is integrated with third party providers so you can instruct a debt collection agency to send a demand letter on your behalf, or even handle the entire debt collection for you. Because the system has an ecosystem of partners ready to help, your debt collection efforts never need to stall.
Have the option to escalate if your internal efforts to collect are not successful
AR data for operational efficiency
When you’re running a mid-sized business, you’ll be taking a systems thinking approach to your operations. You’ll understand that business units impact each other and that information needs to flow between departments for operational efficiency. Your accounts receivable (AR) function can collate valuable insights about your customers’ paying habits, use of credit and cash flow. However, without a system that delivers insights, you could be left operating in the dark. By unlocking the insights in your AR function, you can have more certainty around cash flow forecasting and credit control. Look for a system that deliver insights, not just data.