We’re all aware of the benefits consumers reap from using auto-payments. Just ask anyone who has auto-payments set up for their mortgage, rent, cable, or electricity bill, to name a few.
Each month, the business in question automatically charges the customer’s credit card, based on the initial authorization and payment details provided by the customer. There’s no need to remember to pay a bill, or take the time to write a check and mail it in.
But there’s also the other side of the transaction: the businesses that offer auto-payments. Do these businesses receive benefits from using auto-payments as well? They definitely do – and in some of the same ways as consumers. Here’s a short list of the reasons why businesses should consider auto-payments:
Time savings
How much time does your Accounts Receivable (A/R) team spend collecting payments today? Whatever it is, the overall amount of time is drastically reduced with the addition of auto-payments. No more mailing out paper invoices every month, manually recording checks, or spending time repeatedly following up with late payers. When payments are on auto-pilot, the only thing you’ll have to manage are the occasional declined credit card and any inquiries about billing errors.
Related: How to save time on credit card retries with dunning management
Decreased costs
Eliminating a lot of the overhead related to payments saves money, too. Implementing auto-payments allows you forgo purchasing things like paper, stamps, and envelopes. And the time your employees would spend on mailing out invoices, manually processing payments, and collecting late payments, can be translated into reduced hourly costs – or extra time to focus on true exceptions or optimizing A/R processes.
Related: Optimize A/R reconciliation with these 4 strategies
Improved customer experience
If you’ve ever accrued late fees or received follow-up calls, you know how damaging both of these activities can be to customer relationships. Auto-payments remove both these steps from the equation. All your customer has to do is enter payment details and authorization upfront, and the transaction bills automatically – no reminders required.
Regular revenue
Converting customers to auto-payments means that you bill on a predetermined billing date, according to your schedule. That means no waiting around for the customer to send in a check – payment is processed immediately. With customer payments coming in a predetermined date, your business is much more liquid – and looks better on paper. Days Sales Outstanding (DSO) becomes an irrelevant metric, in that all payments are processed the day they are due.
Related: Measuring collections: use these 2 metrics for a quick snapshot
Higher purchase amounts
This might not ring true for every industry, but it’s worth considering: a recent study by Duke University found that both residential and commercial customers increased electricity usage after switching to auto-payments.
Related: Energy Use Rises When Customers Switch to Automatic Bill Pay
Autopayments may encourage customers to spend more, given that they aren’t looking at how much they spend on a regular basis.
Autopayments provide real benefits to both businesses and customers. Want to know how Invoiced’s AutoPay functions can support your business? Contact us for a demo to learn more.
