We're going to show you how you can get your customers in the HABIT of paying on time!
The fact is, humans and animals are a lot alike. We’re creatures of habit. We do things the same way time and time again—until we learn otherwise. There’s a reason we keep going to the same restaurant over and over, and a reason we buy coffee from the same place, at just about the same time every day (maybe that’s more addiction—which is really just a habit gone awry)!
Like it or not, we’ve all been trained in various ways, and for you to get the most out of your invoicing, and shorten your cash conversion cycle, you’re going to have to train your customers.
Lesson One: Start Early
A great place to start is to check in before the invoice is due! Really? Yes, before it’s due. The most common reason an invoice doesn’t get paid is that it wasn’t received, wasn’t received by the right person, went into a spam folder or some other VERY SOLVABLE A/R problem! By following up early, while the invoice is still current, you are giving yourself a chance to get the jump on any possible issue before it becomes an issue.
Lesson Two: Immediacy
When the invoice is due, or just past due, make sure your customer knows immediately. Make sure they know that you know they’ve missed a bill. Make sure they know that you are waiting. Otherwise, what you’re training them to do… is not pay. You’re teaching them that it’s no big deal to be a little late every month. You’re teaching them that there are no consequences.
Bottom line: If you don’t follow up on time, you’re probably not going to get paid on time.
Lesson Three: Consistency
So you’re following up, and that’s great, but for training to really take hold there has to be consistency. There has to be regularity. Studies have shown that following up at random is not nearly as effective as following up on a set schedule. If your clients know they will be getting a call from you every other Tuesday until the invoice is paid, they are going to get the message. We’ve seen average days to pay drop by 30 to 60 days just by following up on a set schedule. And we’ve seen the number of write-offs drop 90 percent. Trust us, it works.
How often should you be following up? Well that kinda depends —on your company, industry, the invoice size, and external factors like the public markets. Generally we see good results when a company follows up every two to four weeks. But remember: It’s not just about following up a lot; it’s also about following up consistently. You want customers expect your call.
Lesson Four: Cut Through the Noise
The last piece to training your customer — and this is important: Follow up through various channels. Make sure you have your customer’s phone number, mailing address and email address, and make sure you’re using all of them. Contacting your customer through the same channel over and over can get annoying or, worse, turn your follow-ups into white noise. Using multiple channels will help you cut through the clutter.
One tactic that is often effective is to “cluster” your communications. In other words, send a printed reminder, then, a few days later email them a copy of their invoice, then a few days after that, give them a call. Then give it a rest to see if you get a response.
Training your customers will help you get paid faster, remind your customers of your commitment to excellence, keep your credit risk under control, and can even improve your customer relationships in the process.
Now, go get your money.