The types of payment channels you offer can affect customer payment behavior.
If you are frustrated by unsuccessful efforts to reduce DSO, and you have not changed your payment channels for some time, it’s time to take a fresh look at the payment options you offer.
Payment channels can both encourage and discourage favorable customer payment behavior.
How to Encourage Favorable Payment Behavior
If you want to encourage favorable customer payment behavior, start by making your company easy to pay.
Offer multiple payment options including:
- Credit/debit cards
- Automated Clearing House (ACH)
- Electronic Funds Transfer (EFT)
- PayPal and other fintech payment processors
Send electronic invoices with payment links as attachments to emails and text messages.
Provide a customer portal and/or self-serve phone option.
Automated payment options encourage payments on the spot during collection calls, and when the customer receives a text or email with a payment link. Providing a customer portal makes it easy to choose an online payment option, and avoid the payment delays required to process a check.
Many customers, particularly millennials, prefer to use self-serve options so they can work when and where they want. Give them the option they want to encourage favorable payment behavior.
Multiple payment options with access online, through a customer portal or by self-serve phone options will help you to reduce DSO by up to 10 days or more.
Channels which Discourage Favorable Payment Behavior
Offering only payment by check through the mail will discourage favorable payment behavior.
Payments by check discourage favorable payment behavior for several reasons:
- Processing and mailing checks is time consuming and expensive, so customer AP departments often process payments in batches or when they have time.
- Payment by check only eliminates the ability to encourage spontaneous payments via customer portal or self-serve phone option.
- Check payments can be constrained by a Days Payable Outstanding Policy which dictates payment in a minimum number of days, or AP procedures in which checks are processed only on certain dates.
Mailing checks can add up to a week or more to your DSO. Mail time and processing delays make it essential for you to also offer automated payment channels to encourage stellar payment behavior.
Using payment channels to encourage favorable payment behavior helps you to meet customers at the right time, in the right place, with the information needed to get paid on time.
Automated accounts receivable and collections can help your AR team use payment channels to encourage stellar payment behavior. With automation of your AR sequences your AR team will have the tools to stay ahead of the curve on DSO.
The key to successfully automating accounts receivable and collections is to work with an experienced software partner.
Lockstep Collect is a market leader in cloud-based credit and collection platforms. Lockstep Collect can help you to implement the technology applications you need to reduce and control DSO.
If you would like to learn how you can benefit from automating accounts receivable and collections, please contact Lockstep Collect at www.lockstep.io.