Intelligent Receivables Management Can Improve Customer Relationships
Let's face it: Getting customers to pay their invoices is often viewed as one of the least enjoyable parts of running a business. What many companies fail to realize is that every interaction with a customer provides an opportunity to improve your relationship—even during collections. While no customer wants to get the "please pay us" email or phone call, providing a positive experience is key to a continuing relationship.
Every customer interaction is well documented and, for the most part, well executed during the sales and account management processes at many companies. The same should apply to accounts receivable interactions. There are many resources available that highlight the best strategies to getting paid quicker, but the following will help improve customer relations at the same time.
Your customers have other vendors too
Failing to acknowledge that its customers are working with other vendors is one of the biggest mistakes a company can make. As an invoice approaches its due date, a vendor typically sends out a reminder to the customer. This would be effective if your customer only had a few invoices from a few vendors. In reality, they have several, if not hundreds, of open invoices from different vendors, all sending similar reminders.
Worse yet, many of the reminders are simply statements, and do not provide a way for customers to perform actions, such as pay the invoice or file a dispute. Customers are left with an inbox full of nonactionable reminders, leaving them overwhelmed, annoyed, and not responsive to any one vendor.
Software platforms exist that allow vendors to collaborate for the benefit of the customer by providing one bundled payment reminder. This allows the customer to view all of his open invoices from several vendors in one location, and provides a quick link to pay each one or ask any vendor a question. If the customer does ask a question, the vendor is immediately notified and can provide a response.
Customers appreciate vendors that take this customer-first approach, even if it means giving up some personalization. It doesn't mean all customers will start paying on time, but you will see improvement in both customer relations and collection time. When customers can manage several vendors in one location, you will see more customers proactively reaching out to resolve issues rather than setting the invoice aside and waiting for you to call.
Track metrics besides DSO and write-offs
Companies today track almost everything when it comes to the sales and account management process. Sophisticated CRM systems help company leaders keep tabs on every customer interaction, lead, and sale. Instead of only looking at the number of sales completed, companies also track new leads, first meetings, product demos, proposals created, and more. Unfortunately, this detailed approach doesn't usually translate to accounts receivable, which is odd considering that the most process-oriented person in the company, the CFO, is ultimately responsible for this large asset on the balance sheet.
When it comes to accounts receivable, most companies look at how fast they get paid and how much they write off. Business leaders need to go beyond that to improve customer relations while also getting paid faster. So what other metrics should you be looking at?
There are many items that can and should be tracked, but let's focus on three customer interaction metrics:
Customer response time. It's no secret that the quicker you respond to customers' questions, the happier they'll be and the faster you'll get paid. Keep tabs on how long your team's typical response time is when a customer submits a question. Let your staff know that you are tracking this, and they will certainly respond in a timely manner. Let your customers know you track it as well, and you'll show you care about addressing their concerns and that they remain a priority even after the sale. A good accounts receivable management system will track all of this for you while also improving your staff efficiency.
Invoice accuracy. A fast response time is important, but the best customer service is when the customer doesn't have to ask a question in the first place. Pride yourself on sending out accurate and clear invoices and you will have happy customers. To track this, measure the number of invoices where a customer had to reach out to you with a question or disputed an amount. Don't forget to include the instances where the customer didn't proactively reach out, but told you about an error when you called looking for payment.
Customer satisfaction. How satisfied are your customers after your product or service has been paid for? Don't just assume that because they've paid, they are happy. The collection and payment process is often the last interaction with the customer (hopefully until the next sale). Make sure they leave happy, but as stated above, keep in mind that they have many other vendors. It's more than acceptable to ask them for feedback, but don't ask them to complete long surveys and never ask them for feedback more than once a quarter (even less frequently if you do not invoice them often).
Value every customer interaction and don't blow it at the end
Especially with smaller companies, the person paying or approving the bill has more power than you might think. While the accounts receivable department's main focus is bringing in payments, it remains everyone's job to encourage strong customer relations. You've carefully managed your customers through the sales and account management processes; don't let a poor collection interaction ruin that positive experience.
In summary, take advantage of every opportunity you have to interact with your customer. We all know the cost of acquiring a new customer is far more than that of retaining an existing customer. Managing your receivables intelligently from a customer-centric perspective will not only get you paid faster and improve staff efficiency, but will also bring you more loyal customers.
Mark Wilson is the chief executive officer of TermSync, a cloud-based accounts receivable platform.
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