If You're Not Delivering an Excellent Customer Experience, You're Making Getting Paid Harder
A Superior CX Facilitates Prompt Payments
A customer who is happy with the way you handled and fulfilled their orders — somebody who has had a good Customer Experience (CX) with your company — is much more likely to consistently pay on time than another firm whose experience was less than acceptable. Among other customer service issues, the absence of fulfillment errors and invoice discrepancies removes valid reasons to delay payment. In addition, your customers’ favorable opinion of you as a quality supplier should influence them to continue paying you on-time in order to maintain a good relationship with you.
Delivering accurate invoices portrays professionalism and attention to detail, thereby fostering trust and potentially leading to faster payment approvals by your customers based on your positive track record. Here’s why billing errors slow down payments:
Dispute Resolution Time: Inaccurate invoices trigger back-and-forth communication to clarify and fix errors. This process can take days or even weeks depending on the complexity of the issue. With an accurate invoice, this entire delay is eliminated.
Approval Workflow Speed: A clear and accurate invoice is more likely to sail through the client's internal approval process. If the invoice requires clarification or has errors, it might get stuck waiting for explanations or corrections.
Here’s a case in point . . . according to benchmarking studies by The American Productivity & Quality Center (APQC), companies in the top quartile of invoice accuracy are paid 19 days sooner than those in the bottom quartile. A big part of the reason for this is that the top performers only have a 4 percent invoicing error rate while the bottom performers’ error rate is over 10 percent. Another factor is that the top quartile corrects invoice errors within a week, while the bottom quartile takes nearly 3 weeks longer to process corrections.
Studies suggest that billing errors can cost businesses anywhere from 5 to 10 percent of their revenue annually. This leakage can significantly impact a company's bottom line. Moreover, one in five organizations encounter billing errors from vendors or suppliers according to the Kroll Global Fraud Report, validating the fact that errors are reasonably common.
Prevention is key. By prioritizing accurate invoices from the start, you can significantly improve your chances of getting paid faster and avoid the hassles of chasing down payments due to billing errors. Too often, we have observed situations where companies are pressed for time and subsequently make mistakes in their order fulfillment and invoicing processes. Unfortunately, it’s a lot more costly to do it over a second time than to do it right the first time. In addition to accurate billing, making it easy for customers to pay you and conduct business with your organization also benefits your cash conversion cycle.
Seven Consequences from Delivering an Inferior Customer Experience
As already noted, a poor CX can have a significant effect on customer payments. Here are seven potential impacts:
Delayed Payments: If a customer is dissatisfied with the service or product provided, they may delay making payments as a form of protest or to leverage negotiation for better terms.
Payment Disputes: Poor experiences can lead to disputes over invoices or services rendered. Customers may refuse to pay until the issue is resolved to their satisfaction.
Reduced Loyalty: A negative experience can erode customer loyalty, leading to a decreased willingness to prioritize payments to the supplier.
Loss of Future Business: Unhappy customers are less likely to engage in future business with the offending supplier, resulting in lost revenue opportunities and further impacting cash flow should the customer choose to take their business elsewhere.
Reputational Damage: Poor CX can damage a vendor’s reputation within the industry, leading to a negative word-of-mouth undercurrent, making it difficult to acquire new customers or retain existing ones.
Increased Costs: Managing payment disputes and chasing overdue payments incurs additional costs in terms of time, resources, and potentially legal fees should the dispute escalate.
Credit Risk: Persistent payment issues with a customer often signal credit risk, impacting a supplier's ability to secure financing or credit insurance related to the receivable in question. This can limit a supplier's capacity to extend credit to other customers.
Ultimately, providing a poor CX can be detrimental to the financial health and sustainability of a business. It's therefore crucial for companies to prioritize delivering exceptional customer service to maintain positive relationships and ensure timely payments.
To continue reading and learn eight factors for creating an excellent CX from an accounts receivable perspective, you need to be a paid subscriber to Your Virtual Credit Manager . . . our standard subscription is only $5 per month.
Do you need help collecting past due receivables or understanding your customer portfolio risks? The experts at Your Virtual Credit Manager are currently offering 33 percent off our standard small business consulting rates.
Readers of Your Virtual Credit Manager can access sharply discounted business credit reports from D&B, Experian, or Equifax through our partner accredit.
Please share this newsletter with your small business customers . . . it just might help them collect faster and pay you sooner.