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 (AR) function expands.
The fact is, not all automated payment reminder systems are created equal.
Smarter AR for better results
The goal of accounts receivable management is not to get good at issuing payment reminders. The goal is to get paid on time.
Inbuilt payment reminders in your accounting software allow you to generate more reminder 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 provides the following:
- A real-time map of your entire accounts receivable data so you can instantly see the overall debt owed to your business.
- Account level detail including an audit trail of invoice and reminder communications.
- Multi-channel delivery. Email reminders are useful but SMS, post and even fax still reach customers effectively.
- Account-level communication. Your system should report and communicate about each debtor’s account, not just individual invoices. This way, you and your customers understand the total debt.
One source of truth for teams
A common pain point in bigger businesses is keeping 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.
When you have a team of people sending reminders and making phone calls to debtors it’s important to have one source of truth. You’ll need one consistent process and a central place where all debtor data and communication lives.
Think of your CRM. Just as your growing business may have upgraded to customer relationship management system for a complete view of customer relationships, your debtor management system should work as your debtor CRM. It becomes your go-to source of truth–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 become 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 they start collecting money for you:
- Boost open rates by sending 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 one 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).
- Add a Pay Now button. The most convenient payment method you can offer your debtor is the option to immediately click and pay with a credit card. A Pay Now button on your email or SMS reminder lets your debtor click through to a self-serve online checkout.
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 unique 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 sequence
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 add escalating actions to your workflow sequence.
For example, within ezyCollect 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 you can activate with the click of a button, your debt collection efforts never need to stall.
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 function can collate valuable insights about your customers’ paying habits, use of credit and cashflow. 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 cashflow forecasting and credit control. Look for a system that deliver insights, not just data.
- Payment reminders work. They work better when they’re optimised to collect money for you.
- Maintain a big picture view of your entire AR ledger.
- Create one source of AR truth to facilitate team collaboration and visibility.
- Your payment reminders are one part of an escalating sequence of cash recovery activities.
- Use AR insights to improve operational and collection efficiency.
ezyCollect offers an end-to-end solution for complete accounts receivable management.