A simple practice that will get customers to pay faster

If you invest the time earlier to create structure and process around communication, planning, and goal-setting, you can prevent missteps before they occur.

Christine Tsai – Co-founder 500 startups

Collecting money for work delivered is never an easy conversation. Most people are uncomfortable with talking about money, and even more uncomfortable being chased for money owed by them.

There’s one thing worse, not being paid for something you are legitimately owed. Most traditional collections approaches place a huge amount of trust in existing infrastructure to communicate an invoice or payable to a client or customer (post, email, hand delivery). The truth is that the only way to get paid consistently is to build a relationship with the payor and to set clear expectations early in the process.

Early in my career, I interviewed a CFO of a medium sized business which owned a number of car dealerships. When I asked about their process for paying the bills, he opened the draw to his desk and showed me a bin.

“Every bill that comes in that isn’t threatening to turn off our business or to sue us get’s filed in here.” In short, if you don’t chase payment, I won’t pay it because I want to stretch my credit terms. This is proper old school finance, pay your creditors slow and chase your debtors fast, but in today’s fast paced world, this will just get you a bad name and restrict your ability to negotiate on a fair playing field.

Most modern businesses who are not in financial distress do not fight paying items to a contractual term (provided it’s reasonable), and most will pay an accurate invoice timely if you set up the process to support them.

Never trust the mail or email to make a contact first time

When I first started working in collections, I asked what was the number one reason a customer did not pay an invoice. By far the biggest culprit accounting for 45% of late payments, was “I didn’t receive my invoice”.

It doesn’t matter whether you post it (may as well make a paper airplane), email it (guess who’s email is marked as spam) or fax (really who uses fax anymore, it just turns into a pdf which goes to email and is deleted). ┬áThe easiest solution, follow up your first ever invoice to a customer with a phone call to let them know they should of got their very first invoice and do they need any help.

This is a courtesy, not a chase

Customers and partners never like to be chased for money, so the pitch on your call needs to be “service”.

“Hi Bob, I just wanted to check you received your first invoice from us, and if you have any questions?”

The key is not to talk about how much, when or how they will pay unless they ask, the key is to get the confirmation they got the invoice, they understand what it’s for and finally, they have a clear understanding of how and when to make payment.

By having a phone conversation, it’s more personal, you can confirm in real time any problems, and if they do say they haven’t received the invoice, you can send them out a new copy and get them to confirm they have received, or if not, what’s the correct email address. Even better, if you’re lucky enough to have a portal where they can log in to check their invoices, talk them through how to check themselves, and send them a one pager explaining how so they can self serve in future.

On the regular response to “I don’t pay the invoices”, ask for the contact details of who you can speak to, and promise to update immediately in the system to make sure you don’t bother them in future. Always good to check if they still want to receive invoices as a courtesy as well as their payable person, approval queues can be pushed faster when you get the information to everyone in the process first time.

A once in a lifetime call

This practice shouldn’t be repeated every month, it’s about establishing the first point of a relationship with a hopefully repeat customer, confirming they understand the process, and their obligations. If you try it every month, you’re just going to annoy them, and it takes away the veneer of service, let alone breaking your ability to scale collection operations by adding calls.

This is the first step on setting expectations with your customers, and it won’t be the last, but you instantly take out all of the friction generated by a first time call to a partner being angry on both sides, since you get to confirm both of you are speaking to the same information.

It sounds simple, but this one call to a new customer sets a benchmark for the relationship, and gives them an opportunity to ask all the questions they need before they make their payment.

Summary

  1. Most invoices are paid late as a result of incorrect or ineffective sending by the supplier
  2. Confirming the customer got the invoice and clearing queries in advance of due dates makes for an easier conversation
  3. Setting a clear expectation early in the process, makes it less of a surprise if you need to chase an balance later

 

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