In business, closing a sale is only part of the equation. Your hard work hasn’t fully paid off until the corresponding cash is securely deposited into your bank account. Payment acceptance issues — whether caused by customers ignoring outstanding invoices or by payments failing due to unforeseen problems — can disrupt your cash flow and hinder your financial stability.
This is why managing and monitoring your payment acceptance process is essential for ensuring steady revenue and a healthy cash flow. In this article, we’ll dive into what payment acceptance entails, the factors that influence it, and actionable strategies to improve your success rate for receiving payments.
What is payment acceptance?
Also known as the “authorization rate” or the “decline rate,” payment acceptance is a key performance indicator (KPI) that tracks how efficient and reliable your payment processing efforts are. Expressed as a percentage, the metric specifically identifies the proportion of your received payments that are successfully processed and finalized. Typically a score of 90% or greater is considered healthy.
To determine your payment acceptance rate, you would use the formula:
Payment acceptance = (# of successful payments ÷ # of total payment attempts) x 100
For your online payment acceptance rate you would use the same formula, but for this more nuanced metric, you are only concerned with payments attempted and received through electronic channels — such as credit cards, automated clearing house (ACH) transfers, or digital wallets.
Why is payment acceptance important for businesses?
Your payment acceptance rate will directly impact your revenue levels and overall cash flow. Simply put, if these payments are not completed, your income is severely delayed or, even worse, never arrives, which is untenable. At the same time, the lower your score, the more time, labor, and energy you’ll need to dedicate to resolving these underlying payment issues, adding financial drag to your business.
Poor payment acceptance can also undermine customer relationships and threaten future sales. According to a survey of over 400 businesses conducted by Balance Payments, Inc., 83% of respondents indicated that a smooth payment experience was of primary consideration when selecting their B2B e-commerce supplier. And 73% said they would abandon their purchase entirely if they experienced difficulties during checkout.
What factors impact payment acceptance?
Payment acceptance does not exist in a vacuum, meaning there are several outside considerations that can directly influence your success rate, such as:
- Data accuracy: If your invoices, billing details, or payment terms contain discrepancies or errors, you’ve dramatically increased the likelihood that a payment may fail or never be initiated.
- Efficiency: A streamlined process reduces the likelihood that errors or other unexpected delays will creep into your payment efforts.
- Geography: Assuming that you operate in more than one region, you’ll likely need to accommodate varying regulatory guidelines based on where your customer is located.
- Infrastructure: If your underlying network is prone to frequent outages, you increase the probability that a given payment will fail.
- Outside relationships: Not everything payments-related happens under your roof, and if you work with an unreliable payment gateway or payment processor, you can expect more challenges.
- Payment methods: The more options that you support, the more likely that your customers will be able to choose the method with the highest likelihood of success.
- Security: With proper measures in place, you can make it less likely that an unauthorized or inappropriate sale or transaction can even be initiated.
How to improve your payment acceptance rate
1. Make life easy for buyers
Per the Balance Payments survey, you’d be wise to offer intuitive, straightforward checkout and payment services to your customers. Ideally, the entire process will demand very little input from the buyer and be accompanied by clear instructions. And if you are allowing purchases on credit, be sure to have prominently and succinctly posted payment terms to avoid any potential confusion.
2. Accept multiple payment types
As we’ve already stated, offering a variety of business-to-business (B2B) payment methods can directly benefit your acceptance rate. In particular, if a certain transaction fails, the buyer can choose an alternate format that might be more successful. Further, you can also improve customer satisfaction, when you allow shoppers to choose the payment type that works best for their budget and finances.
Typically you’ll want to at least support direct debits, ACH transfers, credit cards, debit cards, online payment processors (e.g., Square, PayPal), and digital wallets.
3. Provide options
Beyond payment methods, you should also offer variety in the channels you support. Embrace more modern mobile or contactless payment services, including support for digital wallets and quick-response (QR) codes. And if you operate under a subscription model, you might provide your subscribers with recurring payment or AutoPay functions. Of course, investing in the necessary infrastructure to support these various services can prove costly, so you might instead look into outsourcing these efforts to a third-party payment acceptance service.
4. Reinforce your infrastructure
When it comes to supporting financial transactions, reliability should always be a priority. You’ll want to choose payment gateways, point of sales (POS) systems, payment acceptance services — any associated provider, hardware, or software — that have a proven track record of consistent performance. If a payment fails because of an outage with your technology, expect to deal with some upset purchasers soon.
5. Prioritize customer service
Obviously, you want your revenue gathering to proceed smoothly, so you’d be wise to have dedicated support resources available to customers if they experience any difficulty during the payment process. Live staff available via telephone are always preferable. Still, if you don’t have the available personnel or need to cover off-hours transactions, you should consider employing an AI-supported chatbot, live chat, or email alternative.
6. Harden security
In any process that deals with money, you’ll want to have fraud prevention strategies and technology in place. Common approaches you should consider are address verification services (AVS), card security codes (CSCs), virtual card payments, real-time transaction monitoring, data encryption, and tokenization.
7. Monitor KPIs
Problems and inefficiencies are, unfortunately, inevitable. However, by effectively tracking the performance of your payment and broader accounts receivable (A/R) efforts, you can identify and resolve these challenges before they have the chance to fester and undermine profitability or customer relations. Ideally, you’ll want to monitor your:
- Accounts receivable turnover (ART)
- Average days delinquent (ADD)
- Collections effectiveness index (CEI)
- Days sales outstanding (DSO)
- Number of revised invoices
- Payment acceptance
- Right party contact rate
8. Empower your customers
Inaccurate payment data is one of the leading causes of failure. Typically, these issues aren’t caused by deception but by oversight. For example, a business may switch offices but neglect to inform you of their new address. Similarly, a customer might be issued a new credit card, and while the card number remains the same, the expiration date or CSC will likely change. These inaccuracies, in turn, can easily disrupt an otherwise smooth transaction, but if you enable your buyers to manage and update their own payment information, these issues can be resolved much more easily — and without involving your staff.
How Invoiced simplifies payment acceptance
Our Accounts Receivable Automation software is a seamless payment acceptance solution for both you and your customers. Our platform can accept a broad range of payment types, even supporting virtual cards and offering automated subscription billing. We also deliver an integrated customer self-serve portal that allows buyers to — with limited or no support from your staff — manage and update their payment information, adjust subscriptions, report discrepancies, and enable AutoPay functions.
Our Smart Chasing feature can automate your dunning efforts, helping to minimize the risk of your outstanding invoices being overlooked and encouraging the likelihood that payments will be initiated in the first place. At the same time, we’ve made it easier to support localized requirements by updating our solution with Flywire’s broad integration capabilities and global payment support which allows us to accommodate the sending and receiving of payments in over 140 currencies.
Finally, you’ll stay on top of the various metrics that empower you to monitor and manage the efficiency of your payment acceptance efforts rather easily. In particular, our Advanced Reporting add-on allows you to build custom reports based on hundreds of objects and field types. And you can even write your own custom queries to draw further insight from your financial data.
Ready to offer simplified payment acceptance? Schedule a demo of our software today.
