4 reasons for using data-driven insights to optimize your payment flows
How do you view your company’s invoice-to-cash process? Is it just a necessary means of getting paid? Or is it actually a valuable resource all on its own? Don’t miss out on the benefits of insights from one of your most important data sources. Turn them into growth engines instead! Here are four examples that will show you how to succeed.
Everyone agrees that data is the new gold. Access to accurate, up-to-date data is a prerequisite for making informed business decisions and benefiting from the latest advancements in AI and machine learning.
Nevertheless, surprisingly few companies are taking advantage of the benefits from collecting and analyzing data from one of their most fundamental business processes: billing and payment.
Why isn’t everyone already using this data?
There are several reasons why this potential goldmine of insights is not being better utilized. One common obstacle is that the billing and payment processes have not been adequately digitized. Frequently, too, the various parts have been outsourced to external partners, making it difficult to get an overview of it all.
It is common for these various players, such as distribution partners and debt collection companies, to have different business models and economic incentives. Serving you with relevant data probably isn’t one of them, even if they could.
4 ways of using and benefitting from this data
With the right digital tools and partners, you can get away from this silo mentality, obtain a holistic approach for your payment flows, and benefit from the enormous amount of data that they generate. But what’s the best way to go about it and what are the biggest benefits?
1. Optimized distribution flows = better cash flow
By digitizing distribution – and the invoice itself – you can start analyzing your distribution data, and get answers to questions like:
- When, where and on which devices do your customers open their digital invoices?
- How often do they look at the invoice? For how long? What things do they click on?
- When do they pay and what payment methods do they use?
Based on these insights, you can set up rules for what will happen in different scenarios and create tailored flows that are automatically triggered.
For example, leading-edge broadband companies are already using fully automated processes to cancel subscriptions for customers who have stopped paying their invoices. This type of automation frees up an enormous amount of time internally by minimizing the need for manual processing and administration.
You can also use the data that you collect to measure, adjust and optimize your flows. Doing so increases the likelihood that customers will pay their invoices on time, thereby improving your cash flow.
2. Softer reminders = reduced risk of churn (and fewer customer service tickets)
Similarly, you can analyze both how and when to send out reminders to the customers who, despite optimized invoice distribution, still haven’t paid on time. Here too, the process can be tailored based on past behavior. You might, for example, want to send a “softer” reminder to a customer who tends to always pay on time but has now missed a payment, rather than treating them the same as a customer who has been late three months in a row.
Using harsh reminders sparingly can also help prevent churn. As an example, data from the Swedish mobile operator Vimla shows that the risk of churn is six times higher among customers who have been sent a reminder. A better way might be sending out a due date reminder in a friendly email or text to customers who still have not paid on the due date. Customers perceive this much better than reminders that come when the payment is already late (especially if they’ve also been hit with a late fee).
Worried about losing revenue by collecting fewer late fees? Keep in mind that late fees tend to raise questions and irritate your customers. Softer methods can pay off and reduce the burden on your customer service function.
Tip! Learn how the mobile operator, hallon, reduced their debt collection cases by 80% by implementing a more customer-friendly debt management process based on data-driven insights.
3. Discover more patterns and use them to develop more accurate scoring models
The more you collect and analyze data on payment preferences and behaviors, the better you’ll be at discovering repeat patterns and predicting future behaviors.
This, in turn, will enable you to develop more accurate scoring models for assessing the willingness and ability to pay of new customers.
4. Better reporting = smarter business decisions
Last but not least: collecting and analyzing billing and payment data in a structured way can help you make more accurate financial forecasts and more informed business decisions.
However, it’s important that those insights reach beyond the finance and accounting department. Better reporting means the ability to generate reports that are tailored to specific needs and target groups. Here, too, in order to succeed, you will need a holistic approach, along with the right tools and partners.
How can you use these insights to fuel growth?
To summarize – your company can use the data-driven insights from its billing and payment processes to:
- improve cash flow
- prevent churn
- minimize internal administration
- reduce the burden on customer service
- make smarter business decisions
Doing so will free up resources that can be reemployed for growth in a way that is aligned with your strategy. You could, for example, prioritize the development of new products and offers, streamline the organization to cut costs – or win market share from competitors by investing more in marketing. The possibilities are almost endless. How you use them is up to you!
Want to know how automation and digitalization could optimize payment flows in your business? Contact us, so we can tell you more!