It’s happened to all of us. Life gets busy and the to-do list gets longer or unexpected cash flow issues cause us to miss a payment or forget entirely about a bill that is due. For consumers, this can be frustrating. But for utilities, telecoms, healthcare providers or anyone who relies on customers paying their bills in a timely manner, the fallout can have a serious impact on the bottom line and day sales outstanding.
Let’s start by looking at the value of collections. According to the Consumer Financial Protection Bureau:
- The market size of the debt collection industry is $18.8 billion in 2022
- The industry in the U.S. has grown 2.6% per year, on average, between 2017 and 2022.
- More than one-in-four consumers (28 percent) has at least one third-party collections tradeline on their file, with that number anticipated to continue to grow
While these statistics deal specifically with the debt collections industry, it’s important to remember that, for each one of those accounts headed into collections, the original biller is missing that amount of revenue. The collections process is often costly, complicated and time-consuming for billers.
So how do billers do everything in their power to ensure that their customers are able to pay their bills and keep their accounts current? While economic hardships are often unavoidable, many times consumers have the funds to pay their bill but either forget or are put off by a bill pay process that isn’t very user friendly.
Customer-Friendly Payment Notifications Drive Transactions
It can be something as simple as a text message. A friendly reminder to customers of their outstanding balance along with clickable links to payment options that can be made from their phone. Statistics show that consumers find these kinds of reminders to be unobtrusive, convenient and efficient.
Even if a customer has fallen behind on their bill, notifications with options such as payment plans or partial payments can help bring current any accounts which are in arrears. This, in turn, improves the billers’ DSO (days sales outstanding).
A company’s DSO is a measure of the average number of days that it takes for a company to collect payment after a sale has been made. The longer the DSO time, the longer an organization has to deal with the resulting negative cash flow or must even consider taking on the additional cost of initiating collections on the amount they are owed.
The True Cost of Collections
There are obvious and some not-so-obvious costs to billers associated with collections activity. If a company must pursue or subcontract out the collection of past-due bills, once collections are made, administrative and processings fees can range from 25-50% of the original debt amount. And that’s if the collections process is successful, which is never a guarantee.
On the other hand, companies who roll out account notifications as part of an overall elevated customer service strategy have found that their willingness to keep their customers informed pays off in the form of on-time payments and customer satisfaction.
Put simply – when companies offer their customers the flexibility and consideration of notifications or payment plans, the not-as-obvious benefits to the biller are that the consumer is more likely to become a repeat or loyal customer.
That’s why being proactive is the key to keeping accounts current. Consumers have overwhelmingly indicated that simple tools such as payment due or past due reminders can help them avoid missed payments or overdue balances.
But there’s even better news – many billers already have this technology at their fingertips and may not even know it.
Do you know if your current payment and billing processing partner offers you these tools? If so, do you need help figuring out how to best implement them? Our #BillBetter experts are here to help you harness the power of notifications and can show you what this simple and effective tool can mean for your bottom line and growth goals.