Late payment chasing technology - Pros and Cons
Over the last few years late payment chasing technology has been on the rise. Some companies rely more on “automation”, whilst others rely mainly on manual and human processes.
Below we discuss automated -v- manual in relation to credit control and chasing of overdue invoices.
So, what are the pros and cons of late payment chasing technology?
Automated Late Payment Chasing Technology
Chances are your accounting package will have the functionality to send automated reminders to chase payment, so the good news is that there is no additional expense when opting for automation.
But how does it work?
The functionality will depend upon which software you use. How you decide to send reminders will be different. However, you could choose from:
- Pre-reminder – maybe 2 weeks or 10 days before the due date.
- Due date reminder – which can also include a payment link, so your client can click through and pay.
- Overdue reminders – ensure the due date is included on all
Research by Sage reveals “the biggest hurdle for chasing late payments for 34% of SMEs globally is their desire to protect client relationships.”
By continuing to send automated late payment reminders via your chasing software, (especially if the following applies):
- The customer has a query
- There are several invoices in dispute
- They have paid the invoice already
you are on track to alienating your customer further and communications may completely break-down. When communications break-down, the customer may become disgruntled and move to an alternative provider.
The software cannot deal with queries and disputes relating to invoices. Where a customer has not received an invoice, it can’t send a copy either. This is where you still require the “human” element.
So, what about the benefits of late payment chasing technology?
If SMEs spend about 10% of every day chasing payments, in some ways, as long as the software is set up correctly for your customers, the automated late payment chasing technology increases efficiency; so it saves you time.
Some companies receive 30,000 invoices a day and those volumes inevitably lead to processing delays when it’s done manually. Technology does play a very important role. It is important to remember though there is many reasons for late payment, including those who often take their chances paying late to give themselves extra time to pay.
According to an article in Forbes: “Britain’s late payment debt burden currently stands at around £46bn with about £39bn of that owed to small and medium sized companies.”
On that note, let us now turn to manual reminders.
Manual chasing - credit control
You may wish to consider this – can a system replace the human touch?
Late payment chasing technology may not know if a customer has a query, or if an invoice is in dispute. So, what will happen if your automated chasing software sends this customer a reminder to pay when you are already aware of their query or dispute? Would you continue to retain their business?
‘People buy people’ and many of the key functions within business are all about forming relationships and working together. So, it’s important to have interactive and rapport building conversations with customers, yes even in credit control!
Admittedly, picking up the phone to talk about an overdue invoice will take more time, however, it will pay dividends in the long run. During phone calls you have opportunity to build rapport, gain more sales and referrals, and recognise changes in behaviour with your customer.
So what’s the solution?
A balance perhaps? Many of the functions within cloud software and chasing technology are necessary. From a credit control and debt recovery perspective the functions allow you to make data-driven decisions, as opposed to decisions made only by “feeling” – like a gut feeling.
Automated technology for chasing payment has its place and will save you time and money. Yet, the credit control role within a business, performed by a human is imperative for the parts which tech cannot do.
How can we help
Talk to us at FJCM to understand in greater detail how we can work together to support your business, saving you time, increasing your cash-flow, and saving you money.