Sooraj Shah explores the pros and cons of automated software that helps businesses to ask for payment.
Over the last few years, late payment chasing technology has been gaining traction – with more businesses using software to automate their payment processes.
In fact, it is clear that businesses have been crying out for the technology just from the sheer number of vendors on the market offering these services. And while each product’s features vary slightly, the main principle remains; helping businesses to cut down on the admin involved in chasing payments – and more importantly, receive the payments more swiftly.
a key element is getting your customers to pay you on time”
One company offering these services is V1. It helps customers by automatically sending documents including invoices, statements and dunning letters via email to customers.
In addition, these documents are made available to credit control teams, so in the event they call a customer to chase debt and the customer claims they haven’t received the goods, the credit control team can check the documents and forward them onto the customer as proof.
Content seriesView full content series
Ian Smith, general manager of Invu, another company that provides accounts payable and purchasing software, explained that late payments is particularly an issue for SMEs.
“Spend control is all important to a company’s bottom line and can be the difference between making a profit or a loss. The availability of cash in a business is all about working capital management and a key element is getting your customers to pay you on time,” he said.
Automation, automation, automation
Steven Renwick, CEO and founder of Satago, another company aiming to put a stop to late payments, believes that automation takes care of 80% of a business’ work when it comes to late payments.
The remaining 20% is “the bit that can’t be automated”, he says, which is trying to understand why the customer can’t pay on time.
Satago has integrated credit bureau data with sales risk data to get a better idea if its customers are in financial distress resulting in a late payment. And, in the case that a customer can’t pay – Satago offers finance too.
But Renwick admitted that automated late payment tech isn’t perfect.
“It works to a certain degree, but there is the additional 20% you can’t let go of just because you’ve automated the payment processes,” he said.
“If someone has a query or a bad credit score you still need to make a decision on whether you’re going to give them credit, so it doesn’t reduce the workload there. However, the company will no longer need three people sending emails and updating spreadsheets, they will just need a dedicated financial controller or a manager to look at the risk of customers,” he added.
This isn’t the only area which would need human intervention, as Dean McGlone, sales director at V1, explained.
“Delayed payments could simply be because of poor processes within a customer where invoices get lost or never reach finance. V1 regularly hears from customers about suppliers sending invoices to people within the business rather than to the finance team; if you want paying quickly then this is not a sensible approach as the budget holder could lose it or forget about it,” said McGlone.
Other potential stumbling blocks
There are a number of other potential stumbling blocks for customers. For example, Satago and its rivals are based on the assumption that the company is using accounting software to raise and send invoices.
“If you’re just using Excel and not accounting software, we’re not going to be able to use them, and in the UK we’ve heard from banks that nearly 60% of businesses don’t use this software,” he said.
On the flipside, most products can be used with any accounting software vendor – so there isn’t the feeling that the customer would be ‘locked-in’ to any particular company.
Another factor when thinking about implementing a late payment chasing product is having to train staff to use it. Renwick suggested that Satago doesn’t get many training requests, and that the software can be installed without any assistance, but even if the tool itself is intuitive to use, it will still require a cultural shift, and employees have to be open to using another new piece of software.
Security is also a growing concern for many businesses – particularly with the highly sensitive data that is used on accounting software and the incoming EU General Data Protection Regulations (GDPR). Renwick states that the firm’s security is on par with accounting software companies themselves.
“QuickBooks for example are very stringent about security – they do penetration testing on us twice a year,” he said.
But while many of these late payment chasing tech providers may well have products that are proven to be secure, the majority of the threat is always down to the people using them. Customers will have to ensure that only specific employees have access to the software, and guard against fraud.
Businesses also need to take into account the importance of relationships – some companies may not appreciate being sent an automated email, while other clients will be far too important to chase via email in the first instance.
No silver bullet
The key for customers to remember is that this technology is not the silver bullet; there is still some manual work that will need to be carried out to receive payments.
In addition, if 60% of businesses do not have accounting software in house, as Renwick suggested, they would need to implement that first before being able to reap the rewards of this automated software. And even once they do decide to implement it, they need to ensure they’ve factored in cultural changes, training and security.
Has your business adopted late payment chasing technology? What was your experience?
About Sooraj Shah
Sooraj is a freelance technology journalist covering all things IT.