Multi-channel payment chasing: The key to improving your cash flow

A shocking 55% of all the invoices issued in the US are paid late. Even worse, 20% of those are only paid after sixty days or more and 11% are never collected at all.

While these statistics highlight one of the main problems facing businesses, maintaining their cash flow during a worsening late payment crisis. However, the fact that 40% of businesses make no attempt at all to chase late payments is even more shocking.

Consistent chasing of late payments is one of the most effective methods to ensure liquidity, empower growth and avoid being one of the 82% of businesses that fail due to cash flow problems. 

In this blog, learn how to implement a multi-channel payment chasing system that will reduce the number of late payments you’re facing, while also decreasing the time your accounts receivables team spends on repetitive tasks

What is payment chasing?

Simply put, payment chasing is the process by which you follow up on late payments. Once an invoice has aged beyond its payment date, your finance team should be following up to ensure as timely a payment as possible 

As we’ve already established, late payments are a common problem for businesses of all scales and contribute significantly to financial strain impacting businesses across all sectors. In fact, the combined global costs of late payments is a crushing $40 billion every year, making effective solutions to the problem a critical part of business success. 

Streamlined and efficient automated payment chasing systems represent a high value/low cost solution to late payments that can help any scale of businesses maintain a healthy cash flow.

The risks of relying on a single payment chasing method

You’ve heard of putting all your eggs in one basket? That’s essentially what relying on one method of payment chasing is.

All modern businesses operate on a multi-channel basis for a reason, no one communications channel is perfect. Emails are easily ignored, SMS messages require signal, and phone calls are only effective if someone actually answers the phone.

Choosing to stick with a single payment chasing method is like choosing to only use a single gear when driving your car. It’s slow, inefficient, costly, and you might not actually make it when you need to go.

Benefits of using multiple payment chasing methods

Taking a multi-channel approach benefits both you and your customers. From a business point of view, late invoices are chased up faster, payments are made quicker, and cash flow is protected.

From your customers’ point of view, they are contacted on their preferred communications channel and given an easy and streamlined way to resolve the issue and make a payment.  It’s a real win/win.

Some of the most impactful benefits of using multiple payment chasing methods include:

1) Improved response rates

The average email click rate is just 7-9%. By comparison, text messages have a 45% response rate. This is not to say that SMS is inherently superior to email, as it's generally easier to obtain an email address than it is to get a phone number. What it does demonstrate is the different strengths of using multiple channels to chase late payments.

Different customers also have different contact preferences and are more likely to respond to messages sent on their preferred channel. For example an office worker is more likely to spot and respond to an email, whereas a contractor is more likely to respond to an SMS message, because they’re less likely to be in front of a laptop.

For example, Chaser users who use SMS payment reminders to reach debtors about outstanding payments are paid 7 days faster on average than those who rely solely on email payment reminders.

Using multiple channels to reach out to your customers is the best way to ensure they respond in a timely manner and make a timely payment.

2) Flexibility and adaptability

Personalization is key to both improving your customer relationships and getting paid on time. By collecting and analyzing customer payment data, you can tailor your chasing schedule to the most effective times and methods.  

Making each message personal and reflective of the current situation and your specifica relationship with the customer demonstrates that you value them. Combine this with a professional and understanding tone and attitude and you’ve got a much better chance of your message being read and acted on.

3) Enhanced communication

Communication is the core to resolving any disputes, including late payments, that you have with your customers. Using a multi-channel reminder system gives you a greater chance of actually connecting with your customers and working with them to resolve the issue.

Effective payment chasing methods

Now that the importance of making use of different payment chasing methods and what benefits a multi-channel approach offers is established, here are some of the most effective chasing methods you can employ:

Chasing payment via SMS text messages 

SMS messages have an open rate of around 90% and most customers respond to an SMS message in just 90 seconds. Not only is this significantly higher than the 20% open rate of emails, but SMS messages are far more effective for targeting non-office-based customers, such as those that may work in construction, retail, or consumer services.

If you work with clients who are more likely to be found on the worksite than in front of a computer, adding SMS payment reminders to your list of payment chasing methods benefits both you and them.

Chasing invoice payments via postal letters

Sending reminders via post might seem a little old fashioned, but it does come with its one range of benefits. As physical mail has fallen out of favor to be largely replaced with email, letters are generally reserved for important documents, priority bills, etc. 

You can take advantage of the added gravitas accorded to physical mail to increase the sense of urgency around payments with your debtors and ensure your payment reminder stands out. Using postal payment reminders also allows you to include a lot more details than you’d be able to communicate with an SMS message.

Phoning debtors to chase invoice payments

Phone calls are arguably the most effective way to resolve a late payment. Connecting on a personal basis with your customer allows you to work together to resolve the situation and it's far harder to ignore someone on the phone than an email or text message.

However, phone calls also come with the largest range of drawbacks. They can be stressful for both parties involved, it can be hard to get a consistent contract number, and, if handled wrongly, they can damage your customer relationships. If you want guidance during debtor phone calls, try these 6 phone call templates to help guide your conversations.

While tools like Chaser’s in-app calling can help to streamline the process, there is another option that gives you all the advantages of a phone call, but without the downsides.

Chasing payments over the phone - automatically 

The image below shows the number of days each feature the holistic approach to payment chasing in Chaser reduces DSO.  The newly introduced auto-calling feature reduces overall DSO by a 20 days, with the entire package reducing total DSO by 38 days on average.

Because it's a fully automated system, Auto-call in Chaser means you don’t have to put in extra time, hire extra staff, or go through the stress and discomfort of making calls yourself. You get all the benefits of making regular payment reminder calls, with none of the associated drawbacks. 

Using technology for diversified payment chasing

When it comes to implementing a diversified payment chasing system to maximize your chances of getting paid on time, automated accounts receivable software is your best friend. 

Chasing payments can be a repetitive and mindless process, which is something that automation excels at. Not only does employing accounts receivable software free up valuable finance team members to focus on more productive tasks, it can also be run 24/7 and does not need to worry about fatigue, burn out, or human error.

Far from replacing expert staff, credit management software helps your finance team to be more productive by taking care of low-skill, but high importance, repetitive tasks.

Tools like Chaser can help integrate and streamline multiple payment chasing methods, bringing together all of your payment chasing methods within one easy-to-use automated system. With fully editable email, SMS, and auto-call templates, Chaser gives you all the benefits of automation, without losing the human touch.

Reduce your DSO with Chaser’s multi-channel payment chasing

The best way to overcome the late payment issues being faced by businesses across the globe is to be proactive. However, proactiveness comes with its own associated costs in staff time and overheads.

Chaser and its range of automated payment chasing methods empowers you to proactively chase late payments without needing to hire new staff or cut into time devoted to other projects. 

To find out more about how Chaser can help you reduce your DSO by 38-days or more, book a demo today or start your 14-day, no-obligation, free trial today.