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Optimizing Customer Payment Collection

If you provide credit to customers or take recurring credit card payments, the unexpected can happen: a customer fails to pay on time, the credit card expires, or the check bounces. What can a business owner do to spend as little time as possible on these items but get the cash collected? Plenty. Here are our ideas:


Re-examine your credit policy


Is there any way you can have credit customers pay up front? Perhaps you can collect a deposit to minimize your risk. Perhaps you can request final payment right before you deliver the final product. Perhaps you can convert credit terms to a layaway situation, like they use in retail.


The best way to speed up collections is to change your payment terms if at all possible.


Be proactive


If the client is late with a payment, respond quickly. Send them proactive reminders. Give them a call just before the payment is due if you have this luxury.


If the customer pays by credit card, monitor credit card expiration dates, and send reminders to update the card before it expires.


Make it easy and clear on your website support section how a customer can update their credit card number on file at any time. Automating this process will save you a ton of time.


Payment failures and disputes


It’s inevitable that you will experience customers whose credit card payments, ACH withdrawals, and checks fail or bounce. As a business owner, you need to have solid procedures for you or your employees to process these exceptions.


When a credit card payment fails, make sure your shopping cart, merchant account, or gateway processor notifies you of the failure. Contact the customer right away to correct the situation. The same is true of bounced checks or failed ACH deposits. Assess any extra fees and flag the customer account if you want to place any future payment or credit restrictions on them.


You may also have customers that report disputes to their credit card company. Respond timely to these transactions as there is always a tight deadline, and make sure you have all of the documentation you need at the time of sale if this comes up.


Develop solid collections processes


If the payment is late, start your collections routine. Send out friendly reminders at first; then get progressively aggressive as the payment grows later and later. It goes without saying, that it is key to have verified the customer’s contact information before collecting payment – this ensures future correspondence will not bounce.


Follow-up steps are very important. Make sure your customer is getting your notifications, and give them a call before you have to take legal steps with them.


Finally, if necessary, turn the payment over to a collections agency who can impact the customer’s credit report and possibly collect your money.


We hope you do not have too much of this activity in your business. But if you do, being proactive is a great way to reduce it. Check to see if you have all the processes described above in place to handle collections in your business so that your cash continues to flow.


If you are seeing trends in either failing to collect payment from clients or in delayed payment collection, speak to one of our accounting experts who can review your accounts receivable in detail for optimization opportunities. Aventa Tax LLC provides accounts payable consultations as part of our bookkeeping add-on services.


Image source: PixaBay

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