How to protect customer relationships while accelerating invoice payment

 In Accounts Receivable Factoring

There are two things that no business can survive without: cash and customers. But how do you protect both during the collections process?

Every business needs a healthy cash flow and strong customer relationships in order to thrive. But when you need to collect payments, it can feel as though you have to choose one or the other. How do you manage the collections process without negatively impacting customer relationships?

It’s a challenge that AR Funding’s New Accounts Coordinator, Rita Gantt, along with the rest of the account management team, tackles every day. With 30 years of experience in accounts receivable funding and management, Rita has perfected the art of balancing the need for timely payment with the need for excellent customer relations. In this article, she shares tips for businesses that need to accelerate invoice payment while protecting the valuable customer relationships they’ve worked so hard to create.

Lay the groundwork

Long before it’s time to collect, you can begin paving the way for a smoother payment process by providing as much information as possible on the invoice.

Each invoice should include a unique identification number, the company name, address, and contact information, a description of the products and services that require payment, the date those products or services were rendered, the total amount owed, and the terms and methods of payment. Invoices should be accompanied by any supporting documentation such as a purchase order, a delivery ticket, a bill of lading, a time-sheet, a rental agreement, or a contract.

The more information you include up front, the easier and faster you make the payment process for your customers.

Know your customer

You may know your customer as a consumer of your products and services, but you also need to know what they are like as debt-holders. As part of our factoring service at AR Funding, we thoroughly research the credit history of our clients’ customers so that we can anticipate their payment behaviors. Performing this type of due diligence on your customers can help you decide who to do business with and what payment terms you set with them.

Follow up promptly

Following up with a customer whose invoice is overdue can take many business owners out of their comfort zone, but it’s an essential part of the business cycle. While you may have the urge to put it off, this can create bigger problems for you and your customer further down the line.

At AR Funding, we make our first call to our client’s customer five to ten days after the invoice is due. This may seem aggressive, but reaching out sooner rather than later is a courtesy to the customer, ensuring that they have everything they need to process the payment and providing it to them in a timely way.

Keep it friendly

Money is a sensitive subject, and talking about it can feel awkward. But inquiring about the status of a payment doesn’t have to put customers on the defensive or make you feel adversarial.

At AR Funding, we treat these follow-up calls as a helpful service. They give us an opportunity to make the customer’s job easier and ensure they have everything they need to process the payment.

Most customers don’t delay payment because they’re dishonest. The issue is more likely to be a lack of time or organization. A call from AR Funding helps them identify the missing pieces, clarify anything that’s holding them back, and successfully complete one of the many tasks on their plate.

Define the steps

When customers understand the steps in the payment process, it helps them feel in control and prepared, so it’s important to explain that process to them at each touchpoint.

In your initial email follow-up, for example, let the customer know that you will be contacting them by phone within a certain timeframe if you don’t hear back. When you make that follow-up call, let them know that you’ll be following up again in seven days if payment isn’t received. If there are consequences for delayed payment, such as penalty charges or legal repercussions, share that information to the customer ahead of time. By communicating clearly and consistently, you are helping the customer make informed choices and take appropriate action.

Consider outsourcing

These tips make handling invoice payments easier, but it still takes time and effort. And while most business owners excel at identifying business opportunities and generating sales, few are equally skilled at the administrative side of things.

Outsourcing activities such as collections, payroll, and taxes can help the business owner focus on what they do best while ensuring that the back-office infrastructure is strong. In the case of factoring services, business owners can free up cash and their valuable time while ensuring that the payment and collections process supports a better customer experience all the way down the line.

Protect your greatest assets

Cash flow and customer relationships are your company’s greatest assets, and with the right collections processes in place, you can protect them both. By establishing multiple touchpoints with the customer and being clear, informative, friendly, and helpful at every step, you can maintain a relationship of trust while accelerating the payment cycle.

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