Beyond DSO: How Distributors Can Improve Customer Relations With Intelligent Accounts Receivable Management

Asking customers to pay their invoices can often be an uncomfortable situation for distribution executives and their finance teams. It’s often considered a necessary evil in the business world. What many distributors may not realize is that while the end goal of these interactions is to receive payments, they are also valuable opportunities to improve your customer relationships.

Asking customers to pay their invoices can often be an uncomfortable situation for distribution executives and their finance teams. It’s often considered a necessary evil in the business world. What many distributors may not realize is that while the end goal of these interactions is to receive payments, they are also valuable opportunities to improve your customer relationships. If you can create a positive experience and still receive payment, it is truly a win-win situation. However, if it is done incorrectly, you may still get paid but also harm the relationship and prevent future sales. 

Unfortunately, many distributors are still not setting up, and actually following, proper processes to encourage positive accounts receivable interactions. For the most part, customer interactions are tracked throughout the sales and account management processes, but those same guidelines don’t usually carry over to the invoicing and collection departments. In order to make sure your customers remain happy throughout the entire payment process, there are a few important items every distributor should consider.

You are not your customer’s only vendor

During the marketing and sales process you were able to stand out from other vendors and your customers chose to work with you. They felt the product or service you provide would play a role in their overall success, which is an incredible compliment to your company. Now that you won out over your competitors, you are essentially a part of your customer’s team. 

But the fact is that they did not choose you to singlehandedly determine their success as their sole vendor. You likely can’t provide every product or service that the company needs and therefore, your customers will be working with many other vendors. Even small businesses require several vendors to properly run their business. It was a benefit to stand out from other competing vendors during the sales process. However, now that you’ve become a trusted partner, it will help solidify you as a long-term partner if you can create efficiencies for your customers by working with their other vendors.      

An example of this can be shown in your receivables process. When your customer’s payment date approaches, refrain from sending out paper account statements and long, personalized reminders. Perhaps this would be effective if your customer had only a few invoices from a few vendors, but in reality, they have multiple, often hundreds, of open invoices from many different vendors. Worse yet, many of the messages are simply a reminder statement and do not provide an easy way for customers to perform actions such as pay the invoice or file a dispute. Basically, your customer is left with an inbox full of unactionable reminders, leaving them overwhelmed, annoyed, and unresponsive to any one vendor.

Software platforms like TermSync allow vendors to work together for the benefit of the customer by providing one bundled payment reminder. This allows the customer to view all of their open invoices from several vendors in one location, as well as a quick link to pay each one or ask any vendor a question. If the customer does need to ask a question or dispute a charge, the vendor is immediately notified and can provide a response. 

Track Accounts Receivable Metrics

Chances are your sales and marketing teams are tracking nearly every customer interaction, lead, or sale with a sophisticated CRM. Unfortunately, this detailed approach doesn’t usually translate to accounts receivable. Considering the most process-oriented person in the company, the CFO, is ultimately responsible for this large asset on the balance sheet, it seems A/R would’ve been one of the first areas to adopt this analytical style.

When it comes to invoicing and collecting, most companies only look at how fast they get paid and how much they write off. Smart distributors, who are often working on thin margins, need to go beyond that to ensure that they are not allowing customers to stretch payment terms.  They also cannot afford to have a huge team working on collections, and they definitely cannot afford to lose customers due to poor interactions during the A/R process. There are many metrics that can help achieve this but let’s focus on three key customer interaction metrics:

  • Customer Response Time – It’s no secret that the quicker you respond to customer questions, the happier they’ll be and the faster you’ll get paid. Keep tabs on how long your team’s typical response time is when a customer submits a question. Let your staff know you are tracking this and they will certainly respond in a timely manner. Let your customers know you track it as well and you’ll show you care about addressing their concerns and that they remain a priority even after the sale.
  • Invoice Accuracy – A fast response time is important, but the best customer service is when the customer doesn’t have to ask a question in the first place. Pride yourself on sending out accurate and clear invoices. To track this, measure the number of invoices a customer has to question or dispute compared to the total invoices sent over a given period. Don’t forget to include the instances where the customer didn’t proactively reach out, but told you about an error when you called them looking for payment. 
  • Customer Satisfaction – How satisfied are your customers after your product or service has been paid for? Don’t just assume that because they paid, they are happy. The collection and payment process is often the last interaction with the customer (until the next sale, hopefully). Make sure they leave looking forward to doing business with your company in the future.  But again, keep in mind your customers have several other vendors. Do not constantly bother them with seemingly endless surveys.

Value every customer interaction and don’t blow it at the end

Especially with smaller customers, the person paying or approving your invoice has more power than you might think. While the accounts receivable department’s main focus is bringing in payments, it remains everyone’s job to encourage strong customer relations. You’ve carefully managed your customers through the sales and account management processes; don’t let a poor collection interaction ruin that positive experience and prevent future sales.

In general, take advantage of every opportunity you have to interact with your customer. The cost of acquiring a new customer is far more than retaining an existing customer.  Managing your receivables intelligently from a customer-centric perspective will not only get you paid faster and improve staff efficiency; it will also improve customer relations which can lead to future sales.  In today’s competitive business environment with many vendors offering similar products or services, these positive interactions factor into customer’s future purchasing decisions.

About the Author

Mark Wilson is the Chief Executive Officer of TermSync Inc, a cloud-based accounts receivable platform. Over his career, he has always focused on process improvements as a way of not only reducing costs but also increasing efficiency and improving internal and external relationships. After seeing first-hand, the amount of corporate waste that can be attributed to outdated invoice and payment processes, Mark realized a significant need in the market was not being addressed. Building on this knowledge and his prior successful startup experience, he formed TermSync. Previous to founding TermSync, Mark was the Corporate Controller for publicly a traded software company, led the accounting, finance and operations functions at a software startup which sold to Microsoft, and worked for a large international CPA firm focusing on technology companies. Mark is a licensed Certified Public Accountant. He received his MBA with an emphasis in Finance and his undergraduate degree in Accounting from the University of Wisconsin Whitewater.


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