Delinquent customers are a part of every business and yours is no exception. According to the World Bank, late payments across the globe constitute over $40 billion every year. Late payments can cause inefficiencies in your cash flow and this can spike your DSO.
If yours is a mid-market or an enterprise, you may not feel the sting of non-paying customers until your business scales. When you don't plan ahead of time, you may find yourself grappling with the challenges of late-paying customers.
What can non-payments lead to?
- Locked cash restricting decision making - If you notice that your cash flow is unstable, it means that you have money from collections locked up at various stages of your collections workflow. Lack of working capital as a result of nonpayment can prevent you from making business decisions such as expanding your business or dealing with your own overhead costs.
- Demotivated collection agents - When collections do not occur on time, collection agents begin to believe that no matter how much effort they put in, the money will not come in. This makes them feel extremely unmotivated and that their efforts are futile.
- Time spent on legal complications - If non-payment is not dealt with proactively, it can lead to you suing the customers, and the legal complications that ensue are extremely stressful, time-consuming, and expensive.
Why customers don’t pay on time - Five ways you can handle non-paying customers
Sometimes a gentle reminder is all that is required to get your customers to pay. However, there are several other reasons why customers do not pay on time. Some factors are under your control, while others are not. In such cases, you can either escalate and get it resolved or take a proactive approach to understand the root cause of late payments and resolve it. Here are various reasons why customers won’t pay.
Delayed collections or non-payment can quickly spiral out of control. A caveat against such a nightmare can help prevent cash flow issues. Here are three ways Growfin can help you realize more cash out of your collections by automating your collections process.
Follow up efficiently with custom strategies
Growfin enables you to build customized collection strategies based on your customer base. Identify customers who frequently delay payments by analyzing their past payment behavior. Create individual cohorts for customers and segment them based on regions, past payment behavior, high-value, critical accounts, and long-tail customers. Create specific follow-up strategies for each cohort for an efficient collections process.
Know more about Growfin’s collections strategy and how you can get the most of it here.
Resolve disputes quickly with account-level visibility
Growfin’s Activities tab is a single source of truth for dispute resolution. It has various categories like email, call, log, notes, disputes, PTPs (commits), tasks, escalations, and write-offs. Each of these tabs is purpose-built to give you real-time visibility. The audit trail helps collaborate easily across teams - sales, finance, management, and dispute resolution teams. Mitigate challenges and have a better system to handle disputes.
Automate dunning for faster collections
Sending out reminders manually or using a dunning mechanism will become humanly impossible as you scale. Imagine sending out hundreds and thousands of manually drafted reminder emails. Your collection agents would only spend time on this and might not be able to handle all of the invoices productively. Because it is manual, a collection agent can only do so much. With AR automation, there is more account coverage. This means that all invoices are touched, particularly those that get stuck in the prioritization queue.
Handling outstanding invoices requires proper planning, and with a finance CRM like Growfin, you can streamline your collections process. Businesses should keep in mind that it is not always the customer who defaults on payment. Evaluate your processes to see what might be preventing them from making timely payments. Better planning leads to greater efficiency.
If you fail to plan, you plan to fail — Benjamin Franklin