Every business banks on its competitive edge in order to grow. Successful businesses deliberately expand their competitive edge beyond their product or service. You’ve probably seen this in action: they doggedly compete for the best talent, the biggest customer, the boldest campaign.
In other words, successful businesses compete for everything.
Take accounts receivable management. When other companies take the foot off the pedal once the sales order is signed, the successful business keeps pumping the gas. A successful business competes to win the job in the first place, then competes to get paid first. After all, the true measure of success is getting paid. Up until that point, your business has been competing to work for free.
Compete for a piece of the cashflow pie
Successful businesses understand that they are competing with every other supplier for a piece of their customer’s cashflow pie. The reality of the payments landscape is that every month, some suppliers will miss out. According to 2019 research by accounting software provider, Xero, each year, Australian businesses are paying the price of late payments to the value of $115 billion. That’s revenue that’s realised too late, or not at all.
But successful businesses don’t stand for this. They make their sales efforts count by actively competing to get paid. The good news is, they only need to deploy simple strategies to gain a competitive edge.
What’s more, these strategies are available to any business.
Want to get paid first? Put your customer first.
It sounds counter-intuitive to suggest that you put your customer first when asking them to pay you, right?
But here’s what successful businesses understand that others don’t: getting paid is a function of your customer’s accounts payable process. That means that your accounts receivable (AR) process must purposefully make paying you less painful. After all, parting with cash hurts.
Your customer’s accounts payable department needs to:
- Receive correct and timely invoice information from you.
- Recognise or identify you as a supplier.
- Add your invoice details to their accounting software / system.
- Be reminded to pay.
- Have money to pay you.
- Be able to easily transfer money to your account.
Remember that yours is not the only business they are dealing with. You could be one of hundreds of suppliers who need to be paid that month.
So how does your business win the payment, just like you won the job in the first place? How do you win the job of getting paid on time?
Successful businesses consistently nail these 10 AR tasks
Consistency is key. Make your accounts receivable process so reliably rock solid that both your company and your customers are clear about your prompt payment expectations.
1. Include the due date on the invoice
At ezyCollect, we have literally hundreds of thousands of supplier invoices running through our system daily. There’s one crucial piece of information that is the foundation of every good invoice (and the chasing process that typically follows): the due date.
Without a due date, your customer may need to manually calculate when your invoice is due. That creates an unnecessary demand on your customer’s accounts payable officer.
Include a due date on your invoice and instantly overcome:
- Input error (they punch in the wrong due date in their accounting system).
- A common excuse “I didn’t know when the invoice was due.”
- Your own problem of knowing when payment is due. (You should know when every account is overdue so you can start chasing payment.)
2. Send a due soon reminder
This typically looks like a friendly email ‘Your invoice is due soon’. This achieves two key things: an opportunity for your customer to pay earlyand teaching your customers that you are on top of your invoices.
In fact, you’re so on top of your invoices that you’re ahead of them! Be consistent here and cement yourself as a business that expects to be paid on time. Your customers won’t have to think too hard about which supplier to pay — they’ll know that you won’t be letting a single invoice slip under the radar.
3. Avoid invoice errors
It’s a known fact that errors in invoices equal payment delays. Not only do you irritate your customer, but a disputed invoice takes extra admin time from both sides to rectify.
- Line item descriptions
- Completion of work
- Unit costs and totals
- Typos in dates
- Sending the invoice late
- Sending the invoice to the wrong person
Invoice errors give customers an easy opt-out of paying you. Your customer can take their time alerting you to the invoice error, and you’ll need to invest more time to re-issue it. All of this unnecessarily slows down your collection time when your goal is to speed it up.
4. Add a call to action
Have you ever sent an e-newsletter without a call to action: Read More, Get Started, Call Now? You wouldn’t dream of it, right?! Putting a call to action on sales material funnels your audience to where you want them to end up.
Now think about your invoice. Does it have a clear call to action?
In the picture below, we’ve added a ‘Pay Now’ button to the invoice. Successful businesses add these to their payment reminders, too. With a call to action, you give your customers a streamlined journey straight to your bank account.
5. Don’t lose time
Every day you’re not getting paid is costing your business money. It’s money lost from your own cash reserves. It’s money you don’t have to buy an early bird discount, buy in bulk for cheaper, or pay your own suppliers.
Successful businesses that get paid on time don’t let time slip away:
- They issue new invoices promptly.
- They chase from Day 1 of an invoice becoming overdue.
- They know which accounts are 10 days overdue, 30 days, 60 days, 90 days etc.
- They have follow-up processes in place to chase their payment on Day 1, Day 7, Day 10, Day 25 etc.
- They have triggers for when a debtor needs to be sent a demand letter, go on COD etc.
- The timing and sequence of their AR process is consistent, reliable, known and repeatable.
6. Remind, remind, remind
You’ll be surprised how many of your customers rely on your reminders to push an invoice to payment. Suppliers know they should be reminding customers to pay, but only have the bandwidth to send one or two reminders per debtor. Even so, a lot of the smaller accounts miss out on reminders because there’s not enough time to contact every account holder,
Priority payees do it differently. They keep reminding, they communicate their reminders by email, SMS and phone, and they don’t over remind. Automation software is the key to hitting the sweet spot of reminder success. Without it, your reminders are likely to be haphazard, incomplete and labour-intensive for both you and your customer.
7. Prioritise the monthly statement
At ezyCollect, we see the monthly statement as a crucial trigger to getting paid on time. It’s a non-negotiable for successful businesses because they are so effective in prompting payments.
What the monthly statement offers your customer’s accounts payable department is:
- A clean and consolidated state of the account – what has been paid and what is owing, nothing extra.
- A reminder of the ways to transfer money.
- Visibility of ageing invoices
For your business, the monthly statement is another opportunity to:
- Invite full payment to settle the entire account.
- Eliminate invoice skipping as all recent invoices are listed.
- Help your customer to pay you by adding a Pay Now button on digital documents.
8. Crank the collection calls
Priority payees are prepared to get on the phone and generate a payment discussion with their debtor. That sounds simple enough but there’s a real skill in getting the results you want over the phone:
- Know who to call each day.
- Have the right information in front of you (including an accurate history of past efforts to collect).
- Express your payment intentions while listening to theirs.
- Be prepared to negotiate.
- Avoid calling in haste or anger.
9. Outsource to recovery specialists
When others businesses stall in their collection efforts, successful businesses succeed by calling in the experts. Their debt collection or legal service partners are ready to send a demand letter or go into debt collection mode. By building out their network of partners, successful businesses can continue competing for the payment while other businesses run out of time and options to chase down the money they’re owed.
10. Care factor: high
Of course, you can quickly nullify all of the above if you let down the side with poor interpersonal skills. Yes, this is B2B, and relationships do matter! You’re likely to still be in the hands of a person who manually pushes your invoices through their accounts payable process (e-invoicing might reduce some of this friction in the future).
There are universal interpersonal skills that are a huge bonus in collections: listening to understand, negotiation, empathy. Offer this to your customers and build them into your accounts receivable system and service. In our experience at ezyCollect, when you focus on people, money follows.
ezyCollect’s accounts receivable platform is purpose-built to get businesses paid faster.