Creditsafe’s Industry Payment Analysis Report revealed that right now, a whopping 25% of all US B2B payment transactions are received late.
In other words, 1 out of every 4 of your customers is clinging onto cash longer than you’d like them to.
Past due payments are on the rise. Some businesses are reserving funds to become recession ready. Others may be victims of late payments themselves, which affects their ability to meet financial obligations. And, of course, there will always be a few that routinely push your credit terms.
All of these challenges are outside of your control. You aren’t able to make customers pay, but you can make it easier for them to do so. With an economic downturn on the horizon, there’s never been a more important time to reduce credit risk by creating a fast, flexible and pain-free payment process.
CHECK THIS OUT
25% of B2B payments are still made using check. Looking at the drawbacks, it’s difficult to believe that companies continue to use a mode of payment that’s so demonstrably unreliable.
Checks are expensive for vendors costing US$4 to US$20 to process. And customers incur significant expense as well — up to US$25 per check that has to be produced. They’re also slow, clearing 5-10 business days from when they are sent, providing that they haven’t gotten lost or held up. Given the significant percentage of companies that continue to use checks, it’s probably not surprising that 15% of B2B payments do not reach the designated company on time.
Real-time payments are fast becoming the norm in the B2B marketplace, as people want to align payments with their busy 24/7 schedule. Vendors want to get cash into the business as quickly as possible and customers want payments to clear so that they have more accurate insight into cash flow. Luckily, there are several digital payment options your company can take advantage of to achieve this.
CONSISTENCY IS KEY
Firms that rely on manual processes take 67% more time to follow up on overdue payments.
If you’re collecting from your customers manually — that means, having your AR team send payment requests through email — you’re exposing your business to credit risk. There are two reasons for this. The first is the efficiency element. That is, the slower you follow up with customers, the slower they will be to pay.
The second is a little less obvious, but just as significant. PWC identifies speed and consistency as key ingredients for a great customer experience. When you follow up with customers manually, you can’t offer either of these benefits. This can lead to customers feeling neglected and it impacts your relationship with them. Unhappy customers are not only less willing to pay — they’re also more likely to search for a new supplier. And that means, it’s not just the transaction that’s at risk, but also the customer lifetime value.
In our real-time world, the only way to meet customer expectations is through automated and customizable communications. These enable you to contact customers early and often, ensuring that your business is always top of mind. You can tailor them to provide all the information your customers need to make payments, while also scheduling them on a cadence that is consistent, which keeps customers informed and engaged.
GIVE CUSTOMERS VISIBILITY
If your customers can’t easily access their account details, the chances are their payment speed will be affected.
Unfortunately, it’s immaterial how friendly and efficient your AR team is. Customers don’t want to spend time calling or emailing them to request copies of invoices or dispute details, or to simply check the outstanding amount on their account. This wastes time and pulls them away from priorities.
You’ll want to provide a solution that offers customers instant access to their account information. They should be able to view open invoices, account credits and the total amount due. They should also have the ability to take action, whether that means making a promise to pay, settling a debt or downloading invoice information.
Enabling customers to manage their business on their own terms is in your best interest. You don’t want them to be ready to make a payment, but to put that on hold while they search for the details. Giving them access to the information they need improves their experience and ensures they have no reason to delay.
A GOOD PLACE TO START
Taking these three steps will kickstart your journey toward a pain-free payment process that reduces unpaid invoices and improves buyer satisfaction. If you’re wondering what else you can do to achieve this, watch our on-demand masterclass — How to Reduce Credit Risk with a Pain-free Payment Process.