For distributors in any industry asking customers to pay their invoices is often the least enjoyable part of the business process. However, while the end goal of these interactions is to get paid, they are also useful opportunities to improve your relationship with the customer. Creating a positive experience for the customer will strengthen your relationship, and encourage them to pay their invoices faster. On the other hand, if done incorrectly, invoicing can harm the relationship and inhibit future sales.
The construction industry presents its own unique billing challenges. Common invoicing practices like retainage and “paid when paid” terms make customer interactions even more important than other industries.
But despite the importance of properly handling payment collection, many construction distribution executives haven’t set up methods to encourage positive accounts receivable interactions. Although customer interactions are closely tracked throughout the sales and account management processes, those procedures aren’t carried over to the invoicing and collection departments. To ensure customer satisfaction throughout the entire payment process, every vendor should consider the following items.
NOT SOLE VENDOR
Neglecting to acknowledge that your customers have other vendors is a mistake often made when it comes to accounts receivable. As an invoice approaches the due date, vendors typically send out a reminder to the customer. This would be effective if your customers had only a few invoices from a few vendors. In reality, they have dozens, sometimes hundreds of open invoices from many different vendors.
Further, many of the reminders are simply a statement and don’t provide any way for customers to complete actions like pay the invoice or file a dispute. Your customers end up with an inbox full of ineffective reminder statements. In the construction industry, it is often difficult to get the attention of the person paying your bill. Avoid adding to the chaos of their inbox and give them tools where they can perform the actions you desire but on their own time. Software platforms like TermSync allow vendors to work together for the benefit of the customer by providing one bundled payment reminder. The customer can view all of their open invoices from multiple vendors in one location, and click on a link to pay each invoice or ask any vendor a question.
Whether stated in the terms or not, often the real terms of a construction contract are “you’ll get paid when I get paid for this project.” It is fairly accepted that sometimes payments are held up until the general contractor gets paid and then payments are disbursed to the other subcontractors and their suppliers.
Often suppliers fall into the trap of assuming they have not been paid because their customer has not been paid yet. Although this can be the case in many instances, it also creates future problems when payments are held up because there was a question about the invoice or something was disputed. Follow up a few days after the invoice is sent with a confirmation email asking them to check that they received the invoice and that it was accurate. Software platforms can automatically send a custom email reminder at predetermined intervals. There should always be a feature that allows customers to reply with questions or concerns.
When it comes to the marketing, sales, and account management processes, companies usually track every customer interaction with sophisticated CRM software. Unfortunately, this analytical approach is seldom applied to managing accounts receivable.
During invoicing and collecting, most companies only look at how quickly they get paid and how much they write off. Vendors should look at other factors to ensure customers are happy and no internal process problems exist. Receivable and customer experience software programs will automatically track these for you and often allow you to enter in your own goals to achieve. Here are three key customer interaction metrics:
- Invoice accuracy: Always send out clear and accurate invoices. Track the number of invoices sent and the number of responses or non-responses. Also track how many times a call for payment leads to them telling about an error on the invoice.
- Customer response time: The faster you respond to customer concerns, the happier the customer will be—and the faster you’ll get paid. Keep tabs on how long your team’s typical response is when a customer submits a question. Inform your staff that you are tracking this to guarantee that they respond to customers in a timely manner. Let your customers know as well to share that you care about addressing their concerns and that they are a priority.
- Customer satisfaction: How satisfied are your customers after your product or service has been paid for? Don’t assume that because they paid, they’re happy. The collection and payment process is often the last interaction with the customer, so take time to ensure that they leave looking forward to doing business with you in the future. If asking for feedback, keep surveys short.
The person paying or approving the bill has more power than you might think, especially at smaller companies. Although the accounts receivable department’s central focus is keeping track of payments, everyone in the company should encourage strong customer relations. You’ve spent a considerable amount of effort to support relationships with your customers through the sales and account management processes. Don’t let a poor accounts receivable interaction ruin that positive customer experience.
Value every opportunity you have to serve your customers well. If you manage your receivables intelligently from a customer-centric perspective, not only will you get paid faster and improve staff efficiency, you will improve customer relations and obtain future business transactions. ■
About The Author:
Mark Wilson is the CEO of TermSync Inc., a cloud-based accounts receivable platform formed after Mark saw first-hand the amount of corporate waste that can be attributed to outdated invoice and payment processes. For more information, visit www.termsync.com.
Modern Contractor Solutions, August 2013
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