According to the U.S. Census Bureau, 26% of outstanding invoices go uncollected after just three months. That number jumps to 70% at six months and increases to a whopping 90% at the 12-month mark. Based on those statistics, once a year has passed, you’ll be better off cutting your losses and writing those uncollected invoices off as bad debt.
The other option is to devote time and manpower to a collections process that may end up costing nearly as much as the unpaid invoices themselves. Either way, you’re losing money and spending resources chasing payments that you may never see.
Savvy business owners know there’s a better way.
Accounts receivable doesn’t need to become a graveyard for abandoned payments. With the right strategies and the help of a collections BPO, you can take action to protect your company from unnecessary losses.
Try these nine tips for more effectively collecting overdue payments and saving your business time & money.
1. Make Payment Terms Clear Up Front
Late payments don’t always happen because of negligence or ill-intent. Often, the reason customers don’t pay their bills on time comes down to simple confusion over payment terms. Create a clear contract and ensure the customer understands the payment schedule especially if your pricing plan is quarterly or service-based. This will help circumvent any misunderstanding and make the collections process easier.
2. Clearly State Goods and Services
Whether you’re using invoices or contracts, ensure your products and services are clearly stated so that customers fully understand the charges. Important details such as add-ons and pricing should be called out. This can help prevent any confusion that could delay payment.
3. Deliver Charges in a Timely Manner
Set up a very clear process with accounts receivable to issue, follow up, and collect on payment. As soon as services are rendered and confirmed complete with the client, draft and send a contract or itemized invoice. A reliable collections workflow will help prevent payment stagnation due to unsent charges.
4. Don’t Let Unpaid Services Fall Through the Cracks
Once a contract or an invoice is issued, it’s easy to move on and trust that the customer will pay. However, failing to follow up can result in forgotten payments, missed incentives, and piled-up outstanding payments. A common practice by home services providers is to follow up during the slow season. Unfortunately, that may make things harder and pile up during service times.
Keep a detailed log of contracts or invoices, including the date they were issued, incentives promised, and the due date. As your business grows, this level of organization can make or break your accounts receivable.
5. Be Flexible, but not to the Detriment of the Company
Managing accounts receivable for home services can be tricky compared to other businesses. In home services, you often come to know customers personally, which makes it harder to stay firm during the collections process. It’s still important to draw a hard line with payment dates and terms.
By partnering with a collections BPO agency like Slingshot, you can leave these tricky negotiations to trained customer service representatives (CSRs). Rather than struggling to seek a balance between prompt payment and positive customer relationships, you can outsource these calls to our professionals making your collections process painless.
6. Implement and Encourage Auto-Payments
With more than 80% of new Slingshot contracts with end consumers resulting in an auto-payment option, it is a popular choice for obvious reasons. While customers may still change their payment methods or the cards may expire, having this option for recurring services goes a long way for successful payments. Many clients enlist Slingshot’s AR team to help get their customers onto autopay to make future payments automatic and easy.
7. Be Easy to Pay
Don’t make it hard for customers to give you money. Offering multiple payment options, while prioritizing autopay, will improve your chances of collecting immediately.
When customers are unable to use their preferred payment methods, like credit, debit, or ACH payments, it can create friction in the payment process. The more friction, the less likely it is you’ll be paid promptly. Limited options and complicated accounts receivable processes slow down the entire system and breed frustration for all involved. When available, it’s best to offer an auto-pay solution for recurring services.
8. Provide Payment Incentives and Non-Payment Consequences
Providing payment incentives can motivate a customer to pay the full amount sooner and with less follow up. Some companies allow a 10% discount for full timely payment. Ultimately, it will depend on what works best for your business and your customer base.
On the other hand, consequences for failure to pay on time can also motivate clients to prioritize payment. Outlining these consequences up front also gives you clear recourse for overdue payments should you need it. Make sure to clearly outline what the collections process will look like and what the penalties are for not paying on time.
9. Confirm the Customer has Received the Invoice
It’s not uncommon for customers to misplace an invoice before having a chance to pay it. Physical invoices can get lost in the mail without ever reaching the client. That’s why it’s imperative that you follow up and receive confirmation of receipt.
Some online issuers can track the invoice, but it’s better to get confirmation through a more personal interaction like a phone call or text. This will convey responsibility and help remind the customer of their payment obligations and service delivered.
Slingshot is your Accounts Receivable Solution
Slingshot offers an omnichannel customer communication solution helping you strengthen cash flow through better collection processes. Create a personalized approach that ensures payment without building a customer service department from scratch.
Over 1,000 home service professionals are already enjoying the benefits of Slingshot, with some reporting a $5.50 return for every dollar spent on Slingshot-powered collection calls.
Connect with us and we’ll help you develop the collections BPO solution you need to ensure unpaid invoices are nothing but a bad memory.