Even when merchants practice due diligence in screening customer applications for credit or loans, late payments are inevitable. In many cases missed payments are the result of oversight. However, other late payments are deliberate. In either circumstance, implementing the following five tools will help encourage on-time payments.
Accept Multiple Types of Payment
Some customers insist on writing paper checks while others prefer to pay online with a debit or credit card. Other customers may pay at a payment kiosk for some payments while making others by cash in person. Demonstrating flexibility in how payments are processed increases the likelihood of receiving on-time payments in one form or another.
Increase Cash Flow by Offering Discounts for Online Payments
Many people, especially those in younger demographic groups, conduct their entire lives online: dating, job hunting, shopping and paying bills. Allowing customers to make online payments with debit or credit cards represents a win-win for both merchants and customers. Customers are spared the hassle of traveling to the merchant to make a payment or writing a check, while merchants receive their money faster, sometimes even immediately. Offering discounts to customers who make on-time payments online encourages those who would pay online anyway to do so faster, and may also inspire customers who might not otherwise consider making online payments to do so.
Net-10 Is the New Net-45
Attaching a shorter, rather than a longer payment window communicates a sense of urgency to the customer — making on-time payment more likely. Doing so plays on human nature to attach priority to matters presented with the most urgency, including paying bills. In other words, all other things being equal, customers will pay bills with net-10 due dates before paying bills with net-30 or net-45 due dates.
Send Automatic Reminders Using Existing CRM Systems
There is no need to reinvent the wheel when it comes to reminding customers of upcoming or past-due dates. Customer Relations Management (CRM) programs are ideal for this purpose. Sending reminders for impending or overdue bills should be standard operating procedure. Such reminders serve two purposes. First, they provide welcome memory jogs for conscientious customers who may have genuinely forgotten about bills. Second, such remainders send a message to customers who might otherwise shrug off a bill that doing so isn’t such a good idea.
Kill ’em with Kindness
Sending out friendly email reminders of upcoming or overdue bills or even making polite phone calls to customers’ homes (not their workplaces) during reasonable hours is fine. Making threats against delinquent or near-delinquent customers is not OK. First and foremost, customers are people. Most people are more likely to respond favorably to a civil or polite reminder than to overbearing bullying. Secondly, overly-aggressive collection attempts can leave creditors exposed to adverse legal actions.
Most importantly, ongoing customer relationships are the lifeblood of any viable business. Arm-twisting may or may not extract payment for existing bills, but it will almost certainly result in the merchant losing customers. Losing customers is never a positive outcome for merchants that wish to remain in business. After all, it is easier to maintain and cultivate existing customers than to generate new ones.
Taking a proactive approach to collecting on-time payments can be a win-win for both merchants and customers. Exercising flexibility in accepting payments, communicating priority to customers through shorter payment periods, providing positive incentives for online payments and keeping the lines of communication open are all productive strategies increasing on-time payments. Get in touch with a PaymentVision expert today to learn more about implementing these strategies.