The Coronavirus pandemic has created business illness in the form of reduced orders and dwindling revenues, and has forced a new emphasis on digitization and remote sales. Companies must now rethink how they connect with customers and collect payments. Getting this right could be the difference between surviving and going out of business.
Any payment process should work for you, be easy to operate and save you time. It's also important to delight your customers (not easy when presenting them with a bill!) so they're around when the market picks up again.
But right now cashflow is what matters, and this means proactively reaching out to customers, not just to persuade them to pay on time, but also to collect those overdue invoices.
Even in normal times, late payments are a problem, and recent figures have indicated that the problem is getting worse.
According to Hitachi Capital, almost a third of SMEs (31%) have experienced late payments, costing their business at least £10,000 during 2019. This has resulted in a 22% rise in the number of small businesses spending time and money in the last year on legal action to chase a late payment. With their reduced cashflow, it’s small businesses that suffer the most.
And the Chartered Institute of Supply sites that, in the UK alone, around £13bn is owed to small businesses in overdue payments, and up to 50,000 businesses are at risk of insolvency every year because they lack the resources of larger businesses to cover such delays.
This is not surprising when you consider that, according to Dun and Bradstreet, in late 2018, SMEs in the UK were owed on average a staggering £80,000 each!
With the added impact of coronavirus and reduced business activity, this situation is unfortunately only likely to get worse.
It’s not just the financial pain of not having your customers’ money in the bank. Costs spent pursuing late payments are also considerable. BACS estimates that the average UK business spends £9k a year chasing and collecting late payments. And Hitachi Capital reckons that 57% of SMEs spend at least an hour a day chasing outstanding invoices and late payments.
Whilst late payment can be due to customers deliberately avoiding or delaying payment, a big factor is also the increasingly busy lives of consumers. With a barrage of emails to deal with plus demands on their time, customers are less likely to prioritise or will miss completely any payment that takes longer than a few seconds or requires too many steps.
Another key consumer development is that 50% of the world’s population now owns a smartphone, and this proportion will increase to 80% over the next four years[i]. Customers nowadays use their mobile phone as a remote control to manage every aspect of their daily lives.
It makes sense therefore to provide a quick and easy way for customers to pay via their mobile phone so they can settle on time, or better still, when they first receive your invoice.
And forget using email! With 90% of consumers wanting to connect with businesses via a text[ii] and 78% of US consumers saying that text communications is the fastest way to reach them[iii], connecting and invoicing by mobile message is essential for any business that wants to thrive in the next decade.
This is borne out by the stats. Open and response rates for outbound texting are in another league compared to email: 95-98% open rate, with 90% opened within 3 minutes with a 45% response rate[iv], with consumers being 7 times more likely to respond to a business text than an email.
Mobile messaging is a personal, conversational interface, and a much more natural way of communicating than email. 90% of consumers want to connect with businesses via messaging[v] as it’s just more convenient for our mobile-first lifestyles.
So how can we use messaging to solve the problem of customer connections and collections?
Researching this issue back in 2019, we realised that payment methods for consumers will increasingly migrate to smartphones. This is due not just to their ease of use but also their inbuilt security features. Nowadays latest PSD2 payment regulations define standards for strong customer authentication (SCA), and smartphones are ideally placed to provide SCA approved payments with inbuilt features such as biometric security.
At Converso, we built what we call transactional conversations, making bill payment a seamless part of a clients’ mobile communications by using text as a user-friendly, personal channel, helping to get messages noticed and invoices paid.
Businesses are now able to message their customers, offer in-conversation sales, send clients invoices with one-click payment, and keep track of the communication regardless of which sales person started the conversation.
And above all, the process makes it easier and simpler for customers to pay, helping businesses achieve early payment and improve cashflow when it matters most.
We've just introduced our beta service and made it free of charge, so you can use text invoicing to help boost your cashflow in these challenging times.
If you’d like to sign up for the beta, please go to www.converso.io, or if you have any questions or comments please get in touch by text on 07451 277570 or by email at firstname.lastname@example.org.
[i] Juniper Research
[iii] Vipes Transaction Messaging Consumer Report