When Cash Flow is King ­– How to Maximize Your Collections

Collecting on outstanding account payments are some of the most significant issues that organizations face.

In an ideal world, businesses wouldn’t need collection teams as customers would pay on time and in full. However, a survey showed that 48% of buyers do not pay on time. As a result of this, businesses in the U.S. lose 52% of the value of receivables for invoices that are over 90 days past the due date.

Often, people simply fail to make on-time payments because they have forgotten. Therefore, the process of collection relies heavily on correspondence to remind customers about invoices that are due or, sometimes, already past due.

This article will help you with a few tips to create an effective follow-up process, whether you do it by text, phone, or a follow-up email.

Following Up with Failed Payments Effectively

Time is of great importance in following up. In collections and account receivables, you have to invoice on time, follow up on time, and realize that the more time passes, the likelihood of collection decreases. You must communicate on time.

Knowing how and when to use a communication method is of significant importance. But before you try and reach out to the customer, retry the payment method on your end, in case you missed something. You need to ensure that everything on your side is covered so you can make a case for the payment collection.

Once things are sorted and clear on your end, you can then begin the follow-up process. I recommend taking the approach of a text message first, then a “double-dial” call, before finally following up with an email.

Following Up Via Text

Text messages often fare much better than traditional outreach methods. They have an average open rate of 98% and a response rate of 46%. They are a great way of not only reaching your clients but also eliciting a response.

Texts provide instant reach. If you’re not sure whether your client will answer your phone call or ignore it, text messages can help cut through the noise and reach your client.

They are also a great way to get past spam blockers, making the collections process a lot less stressful for you.

As a comparatively non-invasive form of communication, sending a client a text creates a more relaxed relationship and encourages them to talk to you.

When sending a follow-up message to a client, make sure that your text body contains your name and the company’s name in it. You should also include the number that you are – or will be – calling from.

Here’s an example of a concise and encouraging text:

"Hi, Suzy! This is Kristina from KM Business Solutions. I need to speak with you about your account. Please give me a call at (414) 265-6697."

Note that this message:

• DOES NOT say that you are calling because the client’s payment failed

• DOES NOT say that you are calling to obtain a payment

• DOES mention that you are calling regarding their account

• DOES create a sense of urgency to prompt the client to get in touch with you as soon as possible

Often, people don’t accept calls from unknown numbers or have automated call blockers in place for unsaved contact numbers. Including your name and contact in the text message gives you a good chance of getting around “unknown” call blockers.

If your phone system does not have SMS functionality, you can use third-party integrations. Here, make sure that the app or service you use for texting purposes is appropriate for your business size.

Many apps are designed for enterprise companies and political campaigns, looking to send thousands of text messages a day. These, of course, wouldn't be ideal if you want a more personal relationship with your customers. YetiText, EZ Texting, and TextMagic are all great options for small to mid-size businesses.

Following Up Via Phone

For most of us, picking up the phone and calling a customer to ask for money isn't necessarily the highlight of our day. In fact, often they are the last step in a follow-up cadence. It is, however, pretty important.

When it comes to making a collection call, you can never be over-prepared. Here are a few best practices to keep in mind:

• Make sure the number you are calling from is a verified and registered number. Doing so would avoid getting your number flagged for spam or scam.

• If you don’t receive an answer on the first call, instead of leaving a message, give the customer a second call. Calling right after the first call creates a sense of urgency. The client will be able to see that the call is important, prompting them to answer it.   

• If there is no answer on the second call, leave a message. Make sure your message entices your client to give you a callback without stating you’re looking for a payment on their account in the message. Sometimes a “mystery” message works best – something very similar to the text message you sent!

• Be ready to handle excuses. Before making the call, compile a list of common customer excuses and match them with effective rebuttals.

• Be clear on all the specifics of the payment you are calling about before you pick up the phone. Having all the necessary information in front of you helps you control the situation. This information should generally include:

                                I.            Invoice reference number

                              II.            Goods or services that invoice is for

                            III.            Number of days overdue (if applicable)

                            IV.            Invoice issue date

                              V.            Notes from prior communication/reach outs you’ve had with the customer

                            VI.            Who to talk to

Following Up Via Email

Lastly, if texting and double dialing have proved fruitless, it is time to follow up with an email.

Similar to text messaging, your email should avoid mentioning the exact details of why you are reaching out, such as payments failing, or outstanding amounts. Rather, it should tell the customer the rough gist of what you want to talk about while also creating urgency.

• Before an invoice is due. At this stage, you should send your client an invoice email politely inquiring whether everything is on track for the upcoming payment. This keeps the invoice fresh in their mind. Don’t forget to include the amount owed, the invoice number, and the due date. Including one-liners – such as “just wanted to drop off a quick note”– can go a long way in dialing down the formality of the email.

• When a payment fails, or an invoice is early overdue. In the early days of an invoice being overdue, you should still be polite but your goal now is to get a payment date agreed upon as soon as possible. Now, instead of asking if everything is on track, you can be slightly more direct and urge the buyer to get in touch with you regarding their account.

• When an invoice is late overdue. If you’ve chased a customer without any luck and their payment is now late overdue, you should continue with the prior follow-up tactics. However, at this stage, you should also let the customer know that late payment is not okay. For example, you can tell the customer that they may incur a late fee. You should also create a sense of urgency by prompting the buyer to reach out to you.

Note that you can craft a masterpiece of a follow-up email. But if it gets swept off to the spam folder of your client, you’ve just wasted your time.

Thus, make sure that you adhere to email security protocols SPF, DKIM, and DMARC. To ensure your domain is using these protocols, use an SPF, DKIM, and DMARC tester like this one.

The Bottom Line

Payment recovery is an essential part of any business. By putting efficient follow-up measures in place, you can achieve a frictionless process that turns late payments into significant opportunities.

Remember that collection is rarely a straightforward process. Thus, set a strong plan to follow up the next day and the day after. Script out your daily, weekly, and monthly follow-up cadence, and boost your chances of clearing your account receivables.