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Does Credit Management Have A Role In Retaining The Loyal Customer?

Martin de Heus, VP of Direct Sales at Onguard, believes that the segmentation of late payers can turn some into loyal customers that pay on time.

Credit management departments don’t necessarily believe their job entail keeping the customer happy.  Whereas sales and customer service departments might be trained in the arts of charm and diplomacy, credit management teams are more likely to value persistence and tenacity.  After all, organisations want outstanding invoices paid as quickly as possible.

However, many businesses believe that competition is now so tough that they must pull out all stops when it comes to customer service.  As they see it, each stage of the customer journey should provide a positive experience and customer satisfaction and loyalty should be the responsibility of the entire organisation, including those chasing debt.

The connection between customer satisfaction and customer service is clear. Back in the 1990s, Fred Reichheld – the brain behind the Net Promoter Score – found that a business that retained 5% more customers was 25% to 65% more profitable than others in the same sector.  His discovery may have been more than 20 years ago but still rings true today when customers are much more knowledgeable, demanding and have the power of the internet at their fingertips.

Since then, the evidence that loyal customers are the driving force behind a successful organisation has kept coming thick and fast.  For example, a much-quoted finding is that an organisation needs 12 positive experiences to sway one negative experience.  We are not just talking about consumers here either, it has also been discovered that 62% of B2B customers buy more after a positive customer experience.

Usually, initial customer contact up to the quotation phase is positive.  From which point on a customer ends up in the order to cash process – a collection of business procedures for the receipt and processing of customer orders and associated payments. Here, the focus is on how fast and efficient the order can make its way through the organisation and the process shows how important it is for the entire organisation to adopt a sense of responsibility for the customer experience.

For many reasons, some customers end up dealing with credit management. While Sales and Customer Service departments will have done their best – with the help of various tools and technologies – to get to know the customer and ensure their satisfaction, here the department’s goal is to acquire funds owed.

It’s a delicate situation.  The wrong approach may negate any early groundwork and jeopardise a potential long-term relationship.  Nonetheless, these customers are in the credit manager’s portfolio for a reason: experiencing payment difficulties, in arrears or have already been transferred to a collections agency.

The organisation wants to keep Day Sales Outstanding (DSO) as low as possible, however the customer still expects to be treated well and with respect.  Respectively, how can organisations create a positive customer experience despite these payment difficulties?

As credit managers are aware, the reasons for non-payment differ greatly between customers; there is never a ‘one size fits all’ approach.  Some may be experiencing temporary difficulties. For example, an understaffed accounts department with a high workload might mistakenly overlook an open invoice. While some always pay late as a matter of policy, and others are genuinely facing cash-flow problems.

Because of these differences in circumstances, all these will act favourably to a personalised approach.

Today there is technology available that monitors each customer’s order to cash journey and this will segment customers, assessing who the customer is, what they need, what the risks are, their payment behaviour and how they prefer to communicate.  Automated reminders, processes and actions can be created based on these segments.  Consequently, communication with a customer who always pays late will differ from those with the customer who simply forgot to pay an invoice.  This functionality provides customers with the attention they need, while at the same time, gives credit managers more time to focus on exceptions.

Because this software provides insights on the entire order to cash process, all stages of the journey can be optimised and KPIs achieved. This may include lowering the DSO, optimising cash flow, improving the ability to focus on the core business and focusing on a positive customer experience. It also gives a fully integrated overview of the cash flow forecasting and outstanding debts.

In short, a positive experience and the lowest possible DSO can co-exist – and a credit management team can focus on the customers’ needs and requirements. After all, with the right care and attention, a late-payer can suddenly transform into a loyal customer – and one that pays on time.