Companies across the world lose millions each year, writing off bad debts as the result of a slow and ineffective debt-collection process.
In 2016, UK banks and building societies were writing off an average of £7,000,000 per day.
But the ultimate expense of the bad debt itself isn’t the only way a slow debt-collection process balloons your bottom line. Resources related to customer outreach racks up costs along the way, too.
In this piece, we’ll explore the top six reasons why your debt-collection process is failing you (and give you insight on how to fix them).
While we all hope that every customer will pay their credit every time, giving them the benefit of the doubt until their accounts are past due leaves you reacting to the situation, not taking proactive steps to prevent it.
The truth is that debt in the UK is mounting, with the average household owing £11,000 each. Businesses have a responsibility and an incentive to make sure it is easy for customers to pay before or soon after a debt is incurred.
Streamline your debt collection process by collecting more customer information — such as conducting a full credit report and identifying early-stage delinquencies — up front to identify high-risk debtors; make sure your team has consistent credit and collections policies to follow, and support your efforts with a credit and payment-collection solution.
Companies that use automation software to support their accounts-receivable department reduce admin time, which allows them to spend 62% of their time communicating with customers about payment.
Don’t wait until they’re past due to reach out; automate communication with your customers so they know when payments are due when those due dates are approaching, and how late they are if they’ve failed to pay.
Gone are the days when every customer responds best to phone calls.
Today, with a plethora of technology at our fingertips, the ways to reach out and communicate are as unique and varied as your customers.
A one-size-fits-all approach to customer communications means that even if customers want to pay their debt, they may not feel comfortable enough communicating with your company to follow through.
By investing in integrated messaging across multiple communication channels, you increase your ability to contact customers and help them pay. You also cut down on the time billed for making repeated calls that are never answered or returned, while also improving your customers’ experiences.
For instance, baby boomers and Gen Xers still respond well to calls, while Gen Yers and millennials generally respond better to text reminders about their owed balances. When it comes to email and chat support for payments, generations X and Y are often the most responsive.
Listen to your data and repayment rates within each customer demographic to ensure that you’re reaching customers where they’re most responsive.
Paying account balances is rarely enjoyable for anyone. Coupled with a complicated, multi-touch payment system, the process is abrasive enough to keep your customers away even when they intend to pay.
Waiting for customers to enter payment information manually and for online banking services to clear it further slows your debt collection process, costing you money each minute you wait and further delaying payment.
The longer it takes them to get to the payment step, the less likely your customers are to pay at all.
Incorporate credit collection software into your debt collection process to eliminate the barriers to pay by creating a one-touch payment system, such as PayPal integration, rather than manually entering banking information.
This way, when you’ve guided customers to the payment stage, they’re met with a frictionless and immediate way to repay their debts.
Relying on the tried-and (somewhat)-true methods of the past works only in static business environments, not in the ever-changing reality of modern business.
By using the debt-collection process that worked for you ten years ago and avoiding new technologies and methods, you stand to lose thousands each year to customers with higher-tech expectations and to companies with modern methods.
Regularly explore the rising technologies and methods — such as credit collection software — that make your debt-collection process simpler and faster.
Spend time researching up-and-coming software in the industry to make your business easier and more profitable while also investing in improved user experiences to keep pace with what your customers expect.
It can be tempting when a debt has become uncollectible to cut your losses and hope for favourable treatment come tax season to offset the loss.
But, the truth is this related expense due to a slow or ineffective debt-collection process is more than meets the eye.
In the US for example, for a write-off of $15,000, a company would have to drum up more than $200,000 of new revenue to generate enough cash flow to offset it.
Don’t cut your losses before trying all the options to recover delinquent debt.
Instead, improve your debt-collection process so you’re able to explore all communication, payment, and settlement options before having to take the bad-debt loss.
By incorporating a payment-collection solution like VoiceSage’s, you can streamline customer outreach and payment, automate reminder communications to follow up with customers that owe you, and reduce the need to write off debt come tax season.
Contacting customers when they fail to pay can be awkward, so many companies put it off to avoid upsetting customers for as long as possible.
But this doesn’t do your business or your customers any favours in the long run.
You increase customers’ stress and frustration by putting off contacting them about their debts instead of giving them the opportunity to take steps to resolve the debts earlier.
Additionally, with each passing day, you’re less and less likely to get paid at all. (Share this)
Use automation software to let your customers know when they’re approaching, at, or past their payment dates to avoid late contact and friction in the payment process, without the need to have your team manually follow up until absolutely necessary.
By capitalizing on payment-collection software, you can increase 90-day-plus promises to pay and improve the conversion of these payments on late-stage debts.
VoiceSage’s credit and payment-collection solutions make payments simpler, increases revenue collection, and reduces the costs of accounts-receivable efforts.
Our customers generate calls from debtors with up to 65% of all debtor calls being inbound, 50,000 fewer cases of customers going into arrears, and as much as a 10:1 return on investment.
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