If every business were perfect at keeping track of B2B collections, all clients would pay all bills, in full, on time, every time. This is, of course, not reality, which is why businesses need to have processes in place for working with clients who struggle to follow through with payments.
B2B collections best practices reduce friction and increase transparency with clients. They are proactive instead of reactive and account for the fact that each client is unique.
Here, we’ll discuss how to make your B2B collection more effective and efficient.
What Is B2B Collections?
B2B collections are the process of recovering outstanding payments from business customers. This may include everything from friendly reminder notes to late fees to legal action. The suggestions below are first-party processes and should be exhausted before engaging a third party.
How To Improve Your B2B Collections Process
Your process should be clearly defined and understood by internal staff and clients alike. Unlike B2C collections, there are larger business relationships to consider. Business accounts are normally much larger and have greater stakes. Smaller consumer accounts are quicker to be handed off to a collections agency, whereas business accounts are managed with greater concern.
So, what are some B2B collections best practices that help you execute a more effective B2B collection operation?
1. Send and Track Multi-Channel Reminders
Much like an omnichannel marketing strategy, an effective B2B collections process doesn’t rely on one method of communication. You may start with reminder emails but have plans in place to include physical letters, phone calls, and even legal notices when specific markers are passed. For example, at 15 days overdue, an email is sent. At 30 days, a physical letter is sent. After 45 days, a phone call is made.
Each step should be clearly documented and recorded for internal tracking or, in extreme cases, legal action.
2. Make It Easier for Clients To Pay
It’s in your best interest to remove as many barriers to payment as possible. Of course, you can’t remove all of them, but you can reduce the friction for processes you control. This starts with making it possible for clients to remit payments. Check to see whether your business:
- Uses modern payment tools.
- Accepts multiple types of payments.
- Offers payment plans.
3. Enforce Penalties for Late Payments
While empathy and understanding help maintain business relationships, sometimes penalties are necessary to settle debts. Transparency is key here. All parties should be fully aware of the following:
- What the penalty is: flat fee, percentage of the invoice, etc.
- When the penalty is enforced: number of days past due date
- Whether there is potential for greater penalties: suspension of services, accounts handed over to collections, etc.
The difficulty of some collections may outweigh the benefits of the amount in question. However, having the penalty in place and actively charging late fees reduces the chance that this will happen.
4. Understand the Warning Signs
The sooner you identify a potentially distressed account, the better. This can be done by analyzing customer data and keeping track of your Collections Effectiveness Index (CEI). An effective A/R platform includes an intelligence component that provides quick snapshots and forecasting. This provides informed decision-making and identifies potential problems before they become actual problems.
From there, develop communications and processes for dealing with accounts with red flags to avoid greater difficulties down the line.
5. Automate Your A/R Processes
The newest key to building more efficient A/R processes is automation. A/R automation includes many aspects of collections, from improving the scope and depth of analytics to making payments easier, to syncing payments, customer data, and invoices with seamless integration technology.
Automation not only improves your efficiency and gives you better insights into performance, but it also frees your staff up to do more impactful work. It reduces the likelihood of B2B payments fraud, giving your team more time and greater peace of mind.
Automate Your B2B Collections Process with Invoiced
With Invoiced, businesses of all sizes have access to a powerful but simple A/R automation platform that provides automation for collections, billing, reporting, and more.
With our additional A/P automation capabilities and business network, Ours is the easiest and most effective way to ensure that your business can continue to grow. To learn more, schedule a demo today!
