Not All Aged Out Invoices Should Become Bad Debt

Nicole Dwyer
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What happens when invoices go past 90 days unpaid? How about 120 days? 

When invoices age past 90 days, it is a sign that this customer requires your attention. This is not just a financial matter, but a customer experience one. It is time to step in and make sure that if this customer relationship can be strengthened -- or salvaged -- and the payment made, that it is. 

However, chasing down payments and staying on top of AR collections is a time-consuming process. Without visibility and prioritization, it’s hard to catch every invoice that needs your attention. When invoices age out and become bad debt, they’re often written off or are sent to third-party collections agencies for pennies on the dollar. You’re not getting the revenue you thought you made, and the question remains: What could you have done to prevent this from happening?

Here are some other common addressable reasons why customers do not pay:

  1. They didn’t know they had a payment due. It’s easy for correspondences to go unread or deprioritized as daily tasks get overwhelming, hectic, or distracting. Simply setting up a collections communication workflow to keep your invoices at top of mind for your client can help them prioritize you. Customize the tone to escalate as invoices move through the pipeline to increase awareness of past due invoices as they age.
  2. The client wasn’t satisfied, didn’t receive, or had issues with the product or service. Delivering to customer satisfaction can be tricky. Sometimes clients may feel that they have not received what they have purchased and hold up payment as a result. This is a critical point in the customer experience that can be flagged during invoicing. The AR team and customer support team must collaborate across departments, with access to the same real time information, to address customer concerns. Having a single platform that can serve the needs of both teams is crucial.
  3. The client wants to apply payments in installments or across multiple invoices. Every client has different payment needs and preferences. How do you build a one size fits all solution for all of them? You don’t. Instead, you provide them with the visibility, capability, and access to through a customer portal. That way, they can log on, see all of their outstanding invoices, and apply payments in whichever combination and method as they desire.  

There are so many ways to stop invoices from aging out and becoming bad debt. As one of our power users said: “Third-party collections is not something you want to do, because even though you can get some percentage of money back, it’s difficult to make it a sustainable business."

Through our advanced aging report, many of our customers are able to use YayPay to provide visibility into their AR pipeline and find out why their clients are not paying. Having transparency about their bad debts not only helped them reduce the number of invoices that have aged beyond 90 days, prevent revenue leakage, but also get insight into improving the customer’s experience.

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Nicole Dwyer
About the Author

Nicole Dwyer is Chief Product Officer for YayPay, bringing more than 10 years’ experience in accounts payable and receivable technology to ensure YayPay continues to meet the needs of its customers. Having spent her entire career in commercial payments, Nicole understands high- and low-value payment systems, the complexities of how businesses pay and get paid, and has worked with distributed teams spanning the globe. She is a graduate of Worcester Polytechnic Institute. Residing in New Hampshire with her husband, daughter, and son, they spend their time outdoors and creating new adventures.

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