Failed transactions are a normal part of business, with data showing that around 11% of all online payments fail to complete correctly. Since failed transactions are a common part of doing business, reducing failed payments should be a priority for accounts receivables (AR) teams of all scales.
By putting in place effective processes to prevent failed payments, such as automatic payment retries, AR teams can ensure timely payment, prevent bad debt without significantly increasing their workload.
This guide will lay out what automatic payment retries are, how they work, the benefits of implementation and how to choose the right automatic payment retry software for your business.
What are automatic payment retries?
Simply put, automatic payment retry software enhances your existing accounts receivable setup by automatically attempting to collect failed payments.
Since payment failures are a common scenario for companies working with online payments, subscriptions and recurring billing models, having effective payment automatic payment retry software in place reduces the number of failed payments without increasing workload.
As a part of your accounts receivables system, automatic payment retries are generally a part of a revenue recovery system. A company’s revenue recovery processes cover any actions that are taken to regain lost or at-risk income.
With research showing that 42% of businesses lose significant revenue due to preventable situations, adding automatic payment retry software to your revenue recovery options is a simple but effective way to revenue leakage.
The importance of automatic payment retries
With 11% of online transactions failing, not chasing failed payments can have a massive impact on your business’s bottom line.
Maintaining liquidity with consistent cash flow is one of the most important aspects of running a thriving business. Companies that neglect their cash flow are often forced into insolvency, with 50,000 businesses in the UK going bankrupt annually because of liquidity issues.
As it stands, businesses across the globe are in the grip of an increasingly dire late payment crisis, with a staggering 87% of businesses paid after their invoice due date
By implementing automatic payment retry software, companies can shore up their cash flow, giving themselves the resources they need to thrive.
How do automatic payment retries work?
While each payment retry system has its own ways of working, most systems work by detecting that a payment has failed and then retrying that payment after a specific timeframe.
How the system works exactly tends to fluctuate based on the business model used by the company employing it. Subscription services generally suspend an account until the payment method is updated. Once the user updates the payment method, the system will then automatically retry the payment.
With online payments and recurring billing models, the system generally detects the failed payments, notifies the customer that the payment has failed, and then retries the payment within a set number of days, usually 5-7 working days. This allows the customer to overcome any payment hurdles they might be experiencing, without losing access to their account or purchase.
Benefits of automatic payment retries
There are a wide range of benefits to implementing a failed payment retry system, such as:
- Improved cash flow - As mentioned earlier, cashflow is the very much the lifeblood of business of all scales. Putting in place a revenue recovery system such as a failed payment retry system helps you get paid in a timely manner, ensuring that you maintain your liquidity and have the resources to grow your business.
- Reduced administrative burden - The workload required to manually chase failed payments can become a huge administrative and financial burden, particularly on smaller AR teams. As with a lot of AR automation options, putting in place a failed payment retry system enables AR teams to efficiently pressure failed payments without a significant increase in workload.
- Enhanced customer experience - While a failed payment retry system certainly benefits your business, it also benefits your customers. Because the system is fully automated, it means that the customer does not need to re-enter their payment details or contact customer service to resolve their problems. The situation is resolved without taking up the customer’s time.
- Reduced involuntary churn - Involuntary churn is a term used to describe when customers unintentionally lose access to subscription services because of billing issues. By suspending subscriptions, instead of canceling them, and then retrying the payment later, failed payment retry systems reduce this involuntary churn and help to retain customers.
- Maximised CLTV - Customer lifetime value (CLTV) measures how valuable a customer is across the lifetime of their relationship with your company as it is an important metric, normally tracked as part of a customer experience program. Because they reduce involuntary churn and increase customer retention, as well as improve the customer experience, failed payment retry systems help to maximize customer lifetime value.
Considerations for implementation
While failed payment retry systems are a valuable addition to any AR system, there are certain critical considerations that should be taken into account when choosing a software package. Some of the most important considerations include:
Choosing the right AR software with automatic retry features
Which AR software (including failed payment retry systems) you choose should reflect which business model you are using. An online shop will need a different set of features from a magazine subscription service, for example. Matching your business model to the prospective AR software is the best way to avoid any pain points when using the system.
Setting appropriate retry intervals and limits
The ability to set up appropriate retry intervals and limits is a hugely important consideration. Depending on your customers and their payment behaviors, you will need the ability to adjust your retry intervals because of the payment data you collect.
Monitoring and adjusting retry strategies based on success rates
Constantly monitoring and adjusting your AR system is the best way to ensure your accounts receivables team is working at peak efficiency. An effective failed payment retry system will include the ability to track payment behavior and adjust retry rates and timelines to ensure best results.
Use Chaser to ensure failed payments are followed up with
Chaser’s holistic approach to credit and payment management ensures you always know which payments have not been received. With Chaser, you can chase any failed payments automatically - without adding to your AR team's workload.
Fully customizable, with adaptable frequency and timing of payment follow ups, Chaser can be changed in response to the data and updates in your accounting system - minimizing manual work and helping your team ensure more of your invoice payments are received on time. As it stands, Chaser has helped thousands of businesses reduce their DSO by 75% and get paid 54 days sooner than average.
Even better, you can get access to all of these advantages without needing to add to your existing workload. As a fully automated system, Chaser actually saves some AR teams over 15 hours per week by reducing the number of repetitive tasks. This means your highly trained AR staff can turn their skills to more productive ends, rather than spending their time manually chasing missed payments.
With automated invoicing and automated payment reminders, Chaser is the perfect solution to help AR teams of all sizes reduce errors and improve efficiency.
Don’t abandon revenue without a retry
Instead of simply abandoning revenue, canceling valuable customers accounts, or spending hours manually chasing failed payments, invest in an effective automated payment retry system to boost your bottom line.
Without adding to your AR team’s workload, an AR platform like Chaser, with a range of automated features including automated reminders, and a whole host of other time saving tools, can ensure your companies cash flow without you needing to lift a finger.
Better cash flow means greater growth for your business and a greater ability to grasp valuable opportunities in the future. Contact one of our experts today to book a demo, start your free trial, or use our ROI calculator to see just how much Chaser can help your business save with just one simple call.
