Invoice Arguments: Understanding the Importance of Collection Calls

With the right dunning process in place, your A/R team can significantly minimize the need for collection calls. While some customers only need a single email to prompt them into action, others require a more complex dunning process. The right approach should be based on a number of factors, such as the type of industry, size of the client, customer risk, payment history, and length and history of the customer relationship. If after the dunning process is complete and your A/R team still is unable to collect on invoices from customers, collection calls might be necessary.

The Importance of Collection Calls

Most customers aren’t actively trying to avoid paying you. They purchase a lot of goods and services, and your organization is one of many invoices that they need to pay. They may also be waiting for their own invoices to be paid  to improve their cash flow. In this fast-paced business environment, collection calls may be exactly what you need to optimize your dunning process and accelerate invoice collections receivables.

Once you’ve arrived at this point, collections calls offer a number of advantages over other invoice collection methods:

Personalized and direct: With a collection call, you can contact the person directly and explain the importance of paying on time. You can get feedback from the person in real time and hear the tone of their voice. You have the opportunity to be more empathetic and understanding of their situation, as well as explain what’s at stake if they don’t pay.

1. Creates Urgency : Collection calls make A/R collections feel more urgent for customers. This can motivate them to pay on time or resolve ongoing invoice disputes as soon as possible.
2. Helps build rapport: Some customers prefer phone calls as they are more direct and offer a way to reach an agreement together. They are certainly more personable and offer opportunities for relationship building in a way email doesn’t. It’s an opportunity to build a customer experience that sets a strong foundation for a good business relationship in the future.
3. Increases transparency: It’s much easier to explain the payment process and answer customer questions in real time. This increased transparency can also help build trust between your business and customers.

10 Best Practices for Effective Collection Calls

Your A/R team can improve your call success by following best practices used by experts. By incorporating these ten proven strategies, you’ll enhance your collection outcomes and maintain a positive relationship with your clients.

Here’s how your A/R can make sure collection calls go as smoothly as possible:

1. Standardize the A/R process. The entire A/R team should work together using the same process for collections to optimize efficiency and ensure clear communications between your A/R team and customers. This also ensures that the team is implementing best practices, such as automation and the customization of dunning workflows.
2. Be proactive. Automate your receivable collections process to prioritize customers who are at higher risk of not paying. Make collection calls as soon as payment is overdue or even before. Early action can lead to timelier closing of invoices.
3. Customize dunning workflows. Consider your customer’s situation: their industry, size, location, and payment history. Do they have a history of late payments, or is this an unusual occurrence based on their history as a customer? The more you tailor a dunning workflow to cater to their needs, the more likely you are to encourage timely payments.
4. Prioritize your calls. Focus on high-impact customers rather than small invoices. Collecting $50,000 on an invoice will contribute more to your bottom line than collecting $5,000.
5. Be prepared. Before making the call, gather all relevant information about the customer, their payment history, and previous reasons for non-payment. Make sure you have all documents related to the customer on hand during the call in case you need them.
6. Have systems in place to document everything. Record every conversation and correspondence to incorporate feedback, ensure accurate documentation, and support any future legal action if necessary. This includes having a system in place for recording any actions or decisions taken or any new information received from the customer during the call.
7. Leverage the power of empathy. Approaching the call with sympathy demonstrates that you understand the customers’ circumstances and can lead to more effective resolution strategies.
8. Watch your tone. Begin the call respectfully and neutrally, keeping your voice calm. Avoid aggressive or condescending language, which may damage the customer relationship and hinder the payment of overdue invoices.
9. Know your end goal. Clearly outline the necessary steps for resolution, including payment arrangements or deadlines. Although your goal is to seek agreement from the customer, you should also know what steps your organization will take if this is not possible.
10. Follow up consistently. Follow-ups are especially helpful to customers at key points in the collections process such as advising a customer as to what payment option they should choose or educating them as to what happens when they can’t pay. Follow-ups also demonstrate your A/R team’s commitment to resolving the issue and reinforce the importance of payment.

How to Deal with an Argument with a Client

Although many customers are appreciative of dunning workflows and collection calls, you’ll need to be prepared for customers who may become defensive or uncooperative and have responses ready to address common objections.

Here are a few tips:

• Answer calmly without being defensive. The best way to de-escalate an argument is not to add fuel to the fire. Your goal is not to argue or be right; your goal is to work together to find an agreement to pay the invoice.
• Know the facts and share them. Of course, you should be prepared with exactly which unpaid invoices you are collecting and all the relevant information related to them. But you should also send them to your customer before the collections call so that they have that information too and you’ll both be on the same page.
• Be professional. Don’t interrupt your customers, raise your voice, threaten them or swear. A difficult customer may do whatever he can to distract you and make you lose your temper. Beware of falling into this trap.
• Stay focused. Remember that your goal is to communicate to the customer that they have not yet paid their invoice, and the next steps you will need to take if the customer continues to not pay.

Optimizing Your Entire Collections Strategy

In a perfect world, you don’t need to make any collection calls. Since we don’t live in a perfect world, how can you drastically reduce the number of A/R collection calls you make?

Expanding your strategy is a good start, but you must also optimize your entire A/R collection process from the beginning.

1. Consider a credit check. Credit risk management includes evaluating your customers through a credit application process and gathering information about their finances through third parties. You can then adjust your collections calls strategy based on which customers have high or low risk.
2. Ensure effective communication. Are your invoices itemized clearly? Each product or service should be listed with a short description. Is your dunning process clear and that it reflects your end goal. An A/R collections dunning template can also help you customize and streamline this process.
3. Make it simple for them. Clearly communicate the number and amount of invoice receivables and how they can be collected. Include payment options that allow many different payment methods.
4. Have a strategy for late invoices. What will you do if a customer chooses doesn’t pay their invoice on time? What kinds of flexible payment options would you consider, at what point do you need to escalate to a collections call?
5. Consider automated invoicing collections receivable software. An automated solution can help you reduce your DSO and make your collections team more efficient.  by reducing manual tasks and streamlining the entire collections process.

How to Collect Receivables Faster with Gaviti

Gaviti’s invoice-to-cash A/R management solutions allows A/R teams to streamline the collections process to significantly minimize the need for collections calls to customers.

• Single view of A/R performance. Gain real-time visibility into outstanding balances, customer payment history, and collections status.
• Automated collections workflows . Define and automate collections actions based on predefined criteria, such as due date, aging of invoices, payment history, or credit terms. Automate reminders, internal or external escalations, and other collections actions, to streamline your collections process.
• Intelligent prioritization. Leverage intelligent algorithms to prioritize collections activities based on factors such as payment history, customer creditworthiness, and the amount outstanding. Focus on high-value accounts to optimize collections efforts and improve cash flow.
• Streamlined customer interactions. Get a comprehensive system to capture and record customer interactions, including calls, emails, and notes. This empowers your collections team to have meaningful conversations with customers, resolve disputes, and build stronger relationships.
• Task management and workflow automation. Automate repetitive tasks and workflows and assign tasks, set due dates, and track progress, ensuring that collections activities are organized and executed in a timely manner.
• Customizable collections strategies. Define escalation rules, implement skip-tracing processes, or tailor collections communication templates so that you can customize collections strategies to maximize results.

Want to learn more about how Gaviti can improve your accounts receivable collection strategies and drastically decrease the need for collections calls?  Speak to a Specialist.

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