Cash flow problems pose a serious threat to small to medium-sized enterprises (SMEs). Indeed, research shows these issues can even cause profitable businesses to go insolvent. Slow or delayed payments are one of the most significant contributors to cash flow problems, making them a problem you can’t ignore.
SME business owners understand the impact of late payments on accounts receivable. However, despite their experience, they often overlook one of the biggest causal factors behind outstanding invoices: customer satisfaction.
When customers are happy, they view your service as valuable. Poor service, on the other hand, leads to disputes, confusion, refund requests, and even negative emotions. Each of these situations contributes to a reluctance to pay on time or at all.
Neglecting the link between customer satisfaction and timely payments can be catastrophic, with consequences including:
- Compromised ability to pay your own customers
- Late payments to your employees that damage morale and trust.
- Less opportunity to invest in your business.
- Lost time spent chasing payments.
Let’s go deeper and explore the link between customer satisfaction and timely payments.
Unhappy customers pay late
The 2022 late payments report shows that only 13% of businesses reported getting paid on time. While the impact of late payments on business is well-documented, the reasons are complex and multi-faceted.
The Domino Effect cannot be underestimated, where late payments cascade and slow payments cycles across the entire business ecosystem. However, one of the primary reasons for delayed payment is low customer satisfaction. There are a few different factors at play here.
Invoice disputes
Disputed invoices are frustratingly common and can happen for various reasons, such as the client being unhappy with a product or service, not receiving their goods, or objecting to a final total. Whatever the root cause, when these disputes drag out, they delay payment.
Refunds
Refunds are a huge problem for retailers, with some estimates suggesting around 20% of goods sold get returned. This issue also affects SMEs and results in drawn-out disputes and delayed payments.
Lack of clarity
Invoice queries are another issue that business owners will know all too well. They are distinct from invoice disputes because the client is not debating the validity of the invoice. Instead, they’re looking for clarification or further information. Providing this information requires a bit of back-and-forth, which inevitably lengthens the payment cycle.
Clarity is essential for timely payments. Any point of friction that you add to payments is a reason for delays that hurt your cash flow.
Improve customer experience for faster payments
The good news is that focusing on positive customer experiences can help resolve the challenges of late payments. There are three primary areas that you can address to help your invoices get paid on time. Each tip is based on the basic principle of removing various points of friction that your customers experience to ensure faster and more manageable payments.
Problem-free experiences
Queries, disputes, and returns are impossible to eliminate in their entirety. However, you can mitigate their effect by providing problem-free experiences for your customers. This process involves looking at your payment lifecycles and addressing issues that have caused historical delays. Resolving processes to eliminate the causes of delays can be fruitful and result in an improved customer experience.
Effective communication
As mentioned above, the back-and-forth between you and your customers when dealing with disputes and queries adds time to the payment lifecycle. Automating reminder payments and warning customers about late payment fees can help the situation.
Easy payment process
So far, we’ve focused on business-related factors that cause late payments. However, simplifying the mechanics of payments is a proven way to reduce delays. Payment portals offer a secure, quick, accurate, and user-friendly way to request payments.
Payment portal allow you to:
- Automate your payments, saving hours of labor.
- Send payment links within your invoice payment reminders.
- Offer your customers different payment options to suit their circumstances.
- Provide a handy dashboard to give your customers visibility over their invoices.
Providing an easy and flexible user experience is an important way to remove the friction that causes late payments. Innovative solutions like Payment portals grant your customers a safe, secure, and reassuring way to make the payments you need to boost your cash flow.
Strategies for addressing customer dissatisfaction
One of the best ways to reduce late or delayed payments is to address the causal issues of customer dissatisfaction. Let’s explore some strategies for mitigating customer dissatisfaction.
Avoiding dissatisfaction
Customer dissatisfaction can manifest in different ways and for varied reasons. It should go without saying that customer satisfaction starts with offering a valuable product or service and extends to the payment process itself.
Here are some valuable tips for eliminating dissatisfaction:
- Engage with consumers and seek feedback on your product or service via interviews, surveys, and reviews. Use what you learn to improve your offer.
- Audit your customer service and ensure they provide helpful, empathetic, and effective resolutions to customer problems.
- Look at your pricing and determine whether it affects customer satisfaction. Consider early payment discounts or flexible payment terms if they are suitable. Remember, competing on value is just as good, if not better, than competing on price.
- Make your invoices as clear as possible, itemize where necessary, and highlight due dates. Additionally, try to offer access to user-friendly payment portals for convenience and security.
Improve your communications
Customer dissatisfaction is something that starts small but grows if left unaddressed. Good communication is key to ensuring your customers are happy.
Here are some tips to help you get communication right.
- Offer omnichannel communication and remember which channels your customers prefer.
- Don’t be afraid to get proactive and reach out to customers with a friendly nudge about payments. Even better, automate these reminder emails to stay on top of outstanding invoices.
- While automation saves time and spares your employees from mundane jobs, some situations require a human touch. Use your better judgment.
- Make your payment policy transparent, including late payment fees. Your customers will appreciate knowing where they stand.
Offer proactive support
You can sit around and wait for situations to resolve themselves, or you can get out in front of them.
Here are some tips on how to offer proactive support.
- Invest in customer success so your team can exceed customer expectations. Encourage your staff to be as helpful as possible and provide tailored advice and support.
- Analyze the payment lifecycle and find barriers and points of friction. Explore strategies to address these concerns and nip them in the bud.
- Late or delayed payments happen for a reason. Shift your mindset from chasing payments to solving the issues that cause them.
How to improve customer satisfaction through your receivables process
Striving for excellence in the payment lifecycle requires turning the spotlight on your accounts receivable (AR) process and finding ways to improve. Here are some valuable tips that can help you improve your AR workflows so they positively impact payment times.
Leverage your confirmation emails
Payment confirmation or thanks for paying emails are part of good manners. They’re also an opportunity to communicate with clients and influence better behaviors.
Here are some tips that you can use.
- Automate your payment confirmation emails and thank customers for payment. This process shows your customers that they’re valued.
- Use emails to nudge habitual bad players to change their behavior.
- Consider promoting other payment options like direct debit for customers who struggle to pay on time.
Consider payment plans
Some customers have cash flow problems of their own. In the worst-case scenarios, they can build up quite a debt, which can be awkward to resolve. A good tip here is to offer a payment plan to ensure you collect that money while keeping relations positive.
Use customer segmentation
Customer segmentation is an important marketing concept. However, you can also use this thinking to organize your customers into groups based on their payment cadence or even how much money they owe. From here, you can adjust your AR processes to suit each case. The upside is that you don’t end up bombarding your generally good payers with excessive messages while simultaneously introducing more dynamism into your AR workflows.
The link between customer satisfaction and timely payments
The link between satisfied customers and late payments is clear. Yet, too many teams overlook or ignore the correlation. Failure to heed the association can hurt cash flow, hinder growth, and put your business at risk of late payments.
Focusing on better customer experiences provides a credible pathway toward optimizing your accounts receivables. Happy clients are prompt payers because they engage in fewer invoice queries, disputes, and refunds. All of these situations are roadblocks to the timely payments you need to keep your cash flow healthy.
Clarity around invoices and the provision of user-friendly payment portals are investments that will bring returns from prompt payments. So, be proactive about communication, automate what you can, and provide flexibility about payments when necessary.
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