As a collections team, mailing dunning emails and collecting receivables from customers are routine tasks. While many A/R teams use the same templates and emails, they often fail to review and test various types of messages. But how can you ensure that you are using the most effective workflow possible? – Simple, your marketing department has been doing this for a long time.
Take a page from the marketing team’s book. Marketing teams use a variety of methodologies and techniques to improve the performance of their email tracks and sequences. By applying these same principles to your collections workflows, you can improve your cash flow and reduce your Days Sales Outstanding (DSO).
Marketing email optimization is the process of ensuring that the emails sent by a marketing team are effective in achieving their desired objectives. This can include increasing the open rate, improving the click-through rate, or increasing conversions.
To apply this to collections teams, the marketing email optimization strategies would focus on improving the effectiveness of the emails sent by the collections team to encourage customers to pay their outstanding debts.
Let’s dive into details.
Timing Your Emails
Timing your dunning emails correctly is crucial for getting your customers’ attention and encouraging timely payments. When determining the best time to send your messages, there are two key factors to consider: the payment due date, and the time when your customer is most likely to be receptive to your message.
First, let’s look at the payment due date. There are three main timeframes to consider: before the due date, on the due date, and after the due date. If you send your first dunning email on or after the payment due date, you are already running late and unnecessarily increasing your Days Sales Outstanding (DSO). By sending a reminder well before the payment due date and another closer to that date when it is less tempting to put the invoice aside, will help your customers pay you much faster.
Tip #1 – Maximizing Payment Timeliness through Strategic Dunning Email Sending
Send your first dunning email before the payment due date to reduce your DSO.
The second factor to consider when determining the best time to send your dunning emails is when your customers are most likely to be receptive to your message. This can be a challenging question to answer, as everyone has their own individual preferences and habits. However, there are some general guidelines that can help you identify the most effective times to send your messages.
First, consider the day of the week. Monday mornings and the first day after a holiday are typically not good times to send marketing emails, as people are typically overwhelmed with work and trying to catch up on their inbox. Instead, aim to send your dunning emails during your customers’ “down time,” such as Tuesday-Thursday midday, when they may be more likely to have the time and attention to process their payments.
It’s also important to take into account other factors that may impact your customers’ workload and availability. For example, if it’s budgeting season or the end of a quarter or year, your customers may be under a great deal of pressure and may not have the time or capacity to process their payments. In these cases, it may be best to send your messages earlier or later in the day, or even to adjust the frequency of your communications.
Tip #2 – Time Your Dunning Emails for Maximum Effectiveness
Send your dunning emails during your customers’ down time, when they are most likely to have the time and attention to process their payments. By considering their individual preferences and habits, as well as broader factors that may impact their workload, you can increase the likelihood of timely payments.
When you receive an out of office response to one of your dunning emails, it’s important to take action rather than simply waiting for your customer to return to the office. There are several options for how to handle these situations:
- Use the out of office message to escalate the issue to your customer’s manager. If you’ve sent your initial dunning email before the payment due date (as we recommended in tip #1), you’ll have time to escalate out of office replies before the payment becomes overdue.
- If the out of office message includes an additional contact who is handling your customer’s work while they are away, reach out to that person instead. This can help to ensure that your payment is processed in a timely manner.
- Set a reminder for the date when your customer is expected to return, and reach out to them once they are back in the office. Keep in mind, however, that they will likely be dealing with a large backlog of work and emails when they return, so it’s best to wait a day or two before reaching out (as we discussed in tip #2).
Tip #3 – Maximizing Payment Timeliness Through Leveraging Out of Office Messages
leverage out of office messages to escalate, reach out to alternative contacts, or set a reminder to reach out once your primary contact is back in the office. By taking action in these situations, you can help to ensure that your payments are processed in a timely manner.
Measure the Success of Your Emails: Understanding Open and Click Rates
When trying to figure out the effectiveness of your emails you need to set a KPI to measure the success level of each email. In addition you will need a higher level KPI to measure the impact of the whole sequence.
When marketing teams measure email effectiveness there are 2 main KPIs: Open rate and click rate. Each indicates a different aspect of the email optimization.
When evaluating the effectiveness of your dunning emails, it’s important to establish key performance indicators (KPIs) to measure the success of each message and the overall sequence. Just like marketing teams, there are two main KPIs that you can use to gauge the success of your emails: open rate and click rate.
The open rate measures the percentage of recipients who opened your email, indicating their level of engagement with your message. Open rate will never be 100%, marketing industry benchmarks are around 20%-30%, however dunning emails should have a much higher open rate. A high open rate suggests that your subject line and sender name were effective at catching your customers’ attention and prompting them to open the email.
This is an important metric for an accounts receivable team to track because it can provide insight into the effectiveness of their dunning emails.
Optimizing the open rate of dunning emails can help an accounts receivable team to get more customers to pay their invoices. Some tips for optimizing the open rate of dunning emails include:
- Using a clear and concise subject line that clearly communicates the purpose of the email, such as “Invoice Payment Reminder” or “Invoice Due in 3 Days”.
- Personalizing the email with the customer’s name and relevant details, such as the invoice number and due date
By implementing these tips, an accounts receivable team can improve the open rate of their dunning emails and increase the chances of getting customers to pay their outstanding invoices.
Tip #4 – Measure Your Email Open Rate
Measure your email open rate and optimize your subject line to increase the number of recipients who open your emails
Click Through Rate
In marketing teams, email click rate (or click through rate) refers to the ratio of the number of people who click on links within an email to the total number of people who opened the email. This metric is used to measure the effectiveness of an email in terms of the number of people who took the desired action (i.e. clicked on a link).
The average CTR for all industries is around 2%, but this can vary depending on factors such as the industry, the quality of the email list, and the subject line and content of the email. A good CTR for dunning emails would be higher than the average, as the goal of these emails is to motivate recipients to take a specific action, such as paying an outstanding debt. Therefore, a CTR of 5-10% or higher could be considered good for dunning emails.
To use email click rate to measure and optimize dunning email workflows, follow these steps:
- Set a specific goal for your dunning emails, such as encouraging recipients to pay outstanding bills or make a purchase.
- Provide clear and easy-to-follow instructions on how to pay the invoice, including links to online payment portals or contact information for the accounts receivable team.
- Avoid aggressive language or tone, and instead focus on politely reminding the customer of their outstanding invoice.
- Encourage your customers to pay now by creating urgency and providing incentives. For example, you could offer a discount for early payment or remind customers of when your office is open for in-person payments.
Tip #5 – Measure Your Email Click Rate
Measure your email click rate and optimize your content to increase the number of customers who take the desired action.
Segmentation and Personalization
Segmentation and personalization are marketing tactics that involve dividing a larger audience into smaller groups based on shared characteristics or behaviors, and then creating customized messages or experiences for each group. These tactics can be used within an accounts receivable dunning email strategy to improve the effectiveness of the emails and increase the chances of recipients taking action.
To use segmentation and personalization in your accounts receivable dunning emails, follow these steps:
- Identify the different segments or groups within your audience that you want to target with your emails. These could be based on factors such as the amount of outstanding debt, the length of time the debt has been outstanding, or the payment history of the recipient.
- Create customized messages or experiences for each segment that are tailored to their specific characteristics or behaviors. For example, you could create different email templates for each segment, with messaging and calls to action that are tailored to their individual needs and motivations.
- Use personalization techniques such as using the recipient’s name in the subject line or body of the email, or referencing specific details about their outstanding debt in the email. This will make the email feel more relevant and personalized to the recipient, increasing the chances of them taking action.
- Monitor and track the response rates and other metrics for your emails to understand their effectiveness and identify areas for improvement. Adjust your segmentation and personalization tactics as needed based on the results of your tracking.
By using segmentation and personalization in your accounts receivable dunning email strategy, you can create more targeted and effective emails that are more likely to encourage recipients to take the desired action.
Tip #6 – Segment Customers Based on Relevant Factors
Segment your customers based on relevant factors such as type, region, industry, or payment term, and tailor your messages to each segment to improve their effectiveness.
Testing and Optimizing
Marketing email testing and optimization tactics are techniques used to improve the performance of email campaigns. These tactics can be applied to collections dunning emails to improve their effectiveness and increase the chances of recipients taking action.
To use marketing email testing and optimization tactics to improve collections dunning emails, follow these steps:
- Identify the specific goals of your collections dunning emails, such as encouraging recipients to pay early, pay on time or pay outstanding bills.
- Use A/B testing to compare the performance of different versions of your emails. This could involve testing different subject lines, calls to action, or email templates to see which versions are most effective at achieving your desired outcome.
- Monitor and track the response rates and other metrics for your emails to understand their effectiveness and identify areas for improvement.
- Make adjustments to your emails based on the results of your testing and tracking. This could involve using the most effective elements from different versions of your emails to create a new, optimized email template.
- Continue testing and optimizing your collections dunning emails on an ongoing basis to ensure they are performing as well as possible.
By using marketing email testing and optimization tactics, you can improve the performance of your collections dunning emails and increase the chances of your recipients taking action.
Tip #7 – Test, Test, Test.
Continuously test different variants of subject lines, times, content, and segmentation to improve your dunning workflows.
Collections teams have their own dedicated platforms, similar to how marketing teams use email marketing automation platforms like Hubspot or Marketo. These platforms allow you to test different subject lines and text to see which ones perform best, and provide insights into when your emails are most likely to be opened and clicked on. In addition to testing and tracking, accounts receivables collections management and automation platforms like Gaviti provide clear KPIs and metrics to give you full visibility and control over your collections process. They can also offer an accounts payable portal for easy, fast, and secure payment of invoices and communication with customers. For example, Gaviti allows you to schedule automatic reminders, track payment history, and generate reports to help you identify trends and areas for improvement in your collections process.
If you’re feeling overwhelmed by the process of running tests and measuring the effectiveness of your dunning emails, consider using an accounts receivables collections management and automation platform like Gaviti..
Overall, using a platform like Gaviti can help you automate, measure, and optimize your dunning email workflows, making them more efficient and effective. Improving your cash flow and reducing your DSO in no time.
Tip #8 – Improving Collections Efficiency with A/R Collections Management Platforms
Harness the power of technology to improve your collections efficiency by using A/R collections management platforms. These platforms can help automate routine tasks, improve communication with customers, and provide real-time insights into your collections performance.
In conclusion, using marketing tactics to improve collections workflow emails can help to increase the effectiveness of these emails and reduce the Days Sales Outstanding (DSO). By considering factors such as the payment due date and the times when customers are most likely to be receptive to messages, as well as regularly measuring, testing, and optimizing your dunning flows, teams can ensure that payments are processed in a timely manner and improve their cash flow. By applying marketing principles to the collections process, teams can enhance their collections efforts and reduce their DSO substantially.