Every business wants to get paid faster. You can do this by simplifying the payment experience and closely collaborating with your customers throughout the entire billing and payment process.
Late payments—and the impending dread of having to collect from non-paying customers—are two of the greatest trials of being an accounts receivable (AR) professional. And unfortunately, it’s a hurdle that can threaten a business’ otherwise healthy cash flow and positive receivables turnover.
In fact, across North America, businesses lose 52% of the value of their receivables that are not paid within 90 days of the due date. From an increase in manual labor and time spent pursuing the collection of debt, to a lack of available revenue to use in growing your business, the impact of non-payment is clear, and its effects can be felt throughout your entire business.
In this blog, we’ll identify the leading causes of late payments, discuss how to manage disputes and collect payment faster, and explain what optimal collaboration looks like between buyers and suppliers and why it’s the key to getting paid faster.
What causes late payments?
First, it’s helpful to understand what contributes to late payments—by identifying the primary culprit, you can take action and right the ship. A recent study found that 55% of accounts receivable professionals say managing disputes is their most difficult task, and a whopping 99% say disputes contribute to late payments.
Knowing this, we can confidently conclude that disputes—and an inability to effectively manage them—consistently lead to late payments. But what contributes to disputes? A lot of things, actually. Disputes can arise when:
- Customers aren’t satisfied with the products or services you’ve provided them with. In this case, they’ll defer payment until they are satisfied.
- The goods you’ve charged them for don’t align with the number of items they’ve received. This too will likely result in non or late payment.
- Sales teams promised customers discounts and haven’t properly communicated these price changes to accounting. When these discounts don’t appear on the customers’ invoices—and the values subsequently aren’t reflective of what the customers are expecting—they will rightfully open a dispute.
Regardless of the cause, your customers will inevitably—at one point or another—dispute their invoices.
And when this happens, your customers will likely make a partial payment or decide not to pay at all, forcing you and your AR team to manually investigate and resolve the issue when balancing your books.
How can you manage disputes and collect payment faster?
Many businesses’ current processes for managing disputes are tedious and prone to errors. Traditional collections tactics that revolve around email and phone communication are clumsy, difficult to audit, and time-consuming. Many collections efforts devolve into games of cat-and-mouse, with collectors often having to work harder than necessary to resolve disputes.
Luckily, this isn’t the only way to approach collections. Enter: collaborative accounts receivable.
Collaborative accounts receivable is the idea that your AR team can eliminate much of the work taking up their day-to-day by engaging with customers in a more structured way. By bringing all your communications with customers into a single online experience, you can save your AR team from sleepless nights and give them time back to focus on more strategic activities.
Your customers do want to build relationships and have direct lines of communication with you. The reason why it’s often difficult to connect with them is because you don’t have the means or the infrastructure to do it effectively. Your customers want a simplified payment experience—one that puts them in control and makes it easy to understand what they need to pay. They want to feel good and certain about what they’re being charged with, and it shouldn’t be difficult for them to determine this for themselves.
Playing phone tag and flooding inboxes isn’t the solution—if anything, these tactics contribute to the problem. By providing your customers with better tools to communicate and collaborate with you, you can get paid much faster.
What does the ideal collaboration between buyer and supplier look like?
The way your customers interact with your finance and accounting teams impacts not only their experience, but also how they’ll perceive your entire organization. When you streamline critical AR processes like dispute management and focus on collaboration, customers are inclined to pay much earlier.
Collaborative accounts receivable portals provide the structure and functionality necessary to connect buyers with suppliers and present customers with a complete view of their account history and activity. Not only do these platforms allow customers to make payments right then and there—using whichever methods they’d most prefer—but they can also prevent disputes before they even happen.
Consider the following use case. Your customer has just received an invoice containing seven line items. After carefully reviewing their order, they come to the realization that Line Item 3 was never delivered. As a result, they decide to open a dispute.
Without an online portal to connect you and your customer seamlessly, you’ll likely revert to attempting to resolve this dispute manually via traditional methods—namely, phone or email. As you’ve certainly witnessed, these processes are inefficient, disorganized, and difficult to do at scale.
What collaborative AR portals do is remove this collection headache entirely—customers can raise an issue with you directly on their invoice, providing you with all the context you need to resolve it right away. These platforms also make it easy for you to loop in other team members—even outside of finance—to get an answer quickly.
In a manner of clicks, everyone who needs to be aware of an issue can be made aware quickly and efficiently. By embracing collaborative cloud-based tools—rather than relying on email and phone calls—customers are empowered to open disputes immediately, attach documentation to support their claims, and involve other team members—all in one place.
Many of these tools are built for mobile activity as well, further supporting a more engaging and accessible customer experience, as customers and AR teams are empowered to resolve disputes anytime, anywhere.
Put an end to late payments once and for all
Better accounts receivable processes start—and end—with collaboration. By engaging customers with highly effective communication channels, you’ll be able to maximize the effectiveness of your collections, tackling problems where they originate—and where the returns are greatest.
Failed collection calls and manual touch points no longer need to define your teams. There are tools out there that prioritize ease of communication and make collections feel a lot less adversarial. Throughout the entire billing and payment process, there are easier ways to resolve customer questions, disputes, and unapplied payments than through manual collections efforts.
No voicemails, no buried email threads, and faster payments. That’s the promise of a collaborative approach to accounts receivable.
By making customer experience a priority throughout the billing and payment cycle, you’ll preserve positive customer sentiment and influence retention. The easier you are to connect with to resolve billing issues, the faster you’ll get paid.
Want to put an end to disputes that contribute to late payments? Get in touch with one of our experts here to learn how you can give your collectors and customers the tools they need to solve issues and make payments lightning-fast.