The PaymentVision Blog

Keys to Effective Card Processing for Collections and Receivables

Keys to Effective Card Processing for Collections and Receivables

Long AR lists can lead to bad debts, write-offs and, ultimately, lost profit opportunities. When businesses fail to collect receivables in a timely manner, they can wind up experiencing cash flow problems and other operational challenges. This makes managing receivables a top priority, with card processing an integral part of the bill collections landscape. Whether a business offers B2B or B2C products and services, offering flexible payment options is a must.

Card Payment Processing Increases Flexibility

When a debtor can use a debit card to make payments, he or she can experience more convenience. By offering card payments, collections and AR accounts are accomplished with less friction. While the upfront costs of accepting card payments is higher than alternative methods of payment, real time authorization helps to reduce the associated costs of returns or insufficient funds.

Dangers of Keeping Collections and Receivables In-House

Even with in-house card processing, tracking receivables and managing collections without third-party assistance can be costly and challenging. For example, 55 percent of businesses hold up an entire invoice when a customer disputes a single aspect of the charge. This can delay the total payment. By processing all undisputed parts of the transaction, a business can improve cash flow and dramatically reduce the amount of time an invoice remains outstanding.

Working with third-party collections does carry extra costs, so it may not be an ideal solution for small businesses or those with effective collection processes already in place. To improve internal collections, it is important to follow industry best practices, particularly as they pertain to card processing.

Card Processing Industry Best Practices for Collections

Collections companies are considered high-risk, simply due to the fact that they are more likely to face chargeback requests. Those facing collection activities often feel pressured, and they make payment arrangements they later regret. This leads to chargebacks and a list of payment processors that will not work with collection-based services. That makes it important to discuss payment processing activities with the processing company before selecting a vendor. The right vendor will handle most of the compliance part of the equation and may even offer AR tracking platforms that can help streamline collections.

B2B Collections and Payment Processing

When specifically dealing with B2B payments and receivables, businesses must be able to offer Level-3 payment processing where possible. These highly transparent transactions carry the lowest interchange rates, preserving profits for businesses. In order to qualify, each transaction must carry information about the purchase. This process can be automated to reduce friction on both sides of the transaction.

Making Payments Easy and Convenient

For any past due account or large receivable, the most important thing to do is enable the debtor to make a payment. That can include offering IVR service via the phone, maintaining a secure online portal and offering in-house card processing. All these methods allow users to pay via a payment card, giving them more options for closing out an old invoice.

Empowering customers during payment is one of the most basic ways of decreasing the amount of lingering receivables. Plus, with card processing, merchants are guaranteed to receive those funds. A check can always bounce, and cash is not always a viable option for handling collections.