Payference: The Tool for B2B Collections Automation

Imagine if every business customer fulfilled its obligations and every supplier meticulously kept up with its B2B collections. In this scenario, each invoice would always be paid on time and in full. And each payment would immediately be recorded and reconciled. The result would be healthier cash flows, and because of streamlined processes, finance teams would have time to focus on tasks that drive growth.

But that ideal is not likely to be in practice any time soon (or ever, realistically), so businesses must have procedures and processes in place to effectively accelerate collections and track payments. They need to follow a set of best practices that foster proactive, rather than reactive, collection activities and communications and increase transparency to nurture better relationships with their customers.

In this blog, we’ll introduce you to a tool that automates the collection process, making it easy for small to mid-market size businesses to put such best practices into place in one easy step. The tool is Payference, an all-in-one cash management solution that leverages the power of AI to increase efficiency, accuracy and visibility for forward-thinking finance teams.

How Are B2B Collections Different from B2C?

B2B is business to business while B2C is business to consumer. Understanding the differences in collections between the two starts with taking a look at how they each function. Let’s start with B2B. These relationships are more complicated. Typically, a business selling its products or services to another business has fewer customers, the sales cycle is longer and invoice amounts are usually higher. Billing might involve credit or financing. Payments are set up to be cyclical, usually need approval and payment details are often outlined in a signed contract. 

B2C, on the other hand, is characterized by smaller invoice amounts and can involve thousands or more individual customers who may pay immediately, be invoiced or are set up on a payment plan. 

The stakes are higher for an unpaid B2B bill than for a B2C invoice. If a B2C customer doesn’t pay on time, the supplier has a few options: They can end the service, repossess the product, or hire a collection agency. But collections in the B2B world are managed differently. Individual consumers are protected under the Fair Debt Collection Practice Act (FDCPA), but businesses are not. If an invoice is left unpaid, businesses can hire a collections agency or pursue legal action.

Businesses trying to collect on an account that’s past due can start by sending a demand letter that lets the customer know the amount due and gives them options for taking care of it–pay in full, make a partial payment or make other arrangements. If the demand letter is unsuccessful, B2B collections teams are allowed, unlike B2C, to do skip tracing and call several times a day.

These tactics are sometimes necessary; however, they don't nurture customer relationships. In addition, they’re costly and inefficient. A better way is to take a proactive approach to managing collections by using automated B2B collections.

How Automation Helps B2B Collections

How much time do you think is wasted on chasing payments? It’s on average 14 hours a week, according to a Quickbooks survey of 2000 mid-size businesses. The survey also showed that those businesses on average had more than $300,000 in debt owed to them.

Businesses can reclaim those hours and reduce their outstanding invoices by implementing B2B automated collections. With an automation tool in place, the following list of best practices is built into your collections process.

Invoice customers faster

Not only is it just common sense that the faster you send an invoice, the sooner your customer can see and pay it, but there’s a psychological aspect to consider. When a customer receives an invoice immediately after receipt of goods or services, it often subconsciously evokes a sense of urgency that compels them to pay. The immediacy of the invoice communicates that you’re professional and that you take your AR processes seriously and expect your customers to do the same.

Send and track reminders and notices consistently

An effective policy is to standardize your customer communications regarding the status of  accounts. A robust, yet flexible solution will let you customize the frequency, intervals and content of the payment reminders and past-due notices you send. With customization you can ensure that your language is friendly, professional and on brand.

Depending on your business goals and values, you may choose to send an email reminder once an account is 15 days past due, a letter at 30 days and then any communication after that is handled with a phone call. Whatever policy you establish, the automation solution will track each step of the process. 

Make it easy for your customers to make payments

While automation streamlines your collections process internally, it also removes obstacles to making payments, offering your customers a high level of convenience. This includes accepting multiple payment methods such as ACH, credit card, wire transfer, paper checks, and digital wallets. Offering payment plans and a self-serve customer portal are additional ways to simplify the payment process. With a self-serve portal, customers can log in to view their account and make a payment when it’s convenient for them, saving your AR team time too.

Clearly communicate policies and payment terms

Transparency around payment policies and payment terms is key. A simple yet effective tactic to help with collections is ensuring that your payment terms are clearly stated and readily visible on your invoices. Include the due date, late fee information, payment options, details about early payment discounts and any other info that your customers should know.

Offer an early payment discount

Just as you penalize late payments, you should reward early payments. Even a small discount can be enough incentive to encourage customers to develop a habit of paying early. This benefits you in several ways. It helps with your cash flow and also saves on the cost of chasing down late payments.

Know which customers pose a risk

It’s important to pinpoint high risk accounts before they get out of control. Payference uses AI technology that automatically analyzes historical customer data to identify accounts that could put your cash flow at risk. That way you can proactively deal with a “red flag” customer before you’ve extended more credit than is wise and created greater difficulties down the road.

The Best Practice is Implementing the Best Solution

Using Payference's automated B2B collections software streamlines your AR process, from invoicing to reconciliation. The solution speeds up each step of your AR cycle by replacing the manual tasks that eat up so much time with automated workflows and reducing the inaccuracies from human input that also cause delays.

Here’s how it works. Once sales data is entered into your ERP, invoices with all the correct data are generated and sent digitally to customers. Without automation, completing this task can take days, even weeks, and is prone to error. With automation, it’s merely minutes.

The invoices are standardized and clearly display your payment terms where customers can readily see them. And because the solution is powered by AI, it can forecast expected payments and use customized workflows to drive collections closer to terms.

The software automatically sends payment reminders and overdue notices on a schedule that you customize for your needs. Instead of your finance team wasting time on this task, they can shift focus to more valuable tasks.

Payference makes it possible for you to provide your customers with a built-in self-serve portal that accepts multiple payment methods. This means you can offer them the ultimate convenience for making payments and reviewing their account. Paired with the high level of accuracy, the fact that they can access their account whenever they desire leads to improved collections rates, higher customer satisfaction and better business relationships.

It’s easy to see why Payference is quickly becoming the preference for B2B automated collections for small and mid-market size businesses. If you’d like to learn more about accelerating your collections and improving your overall cash management, schedule a short, no pressure demo today.