Customer reminders are a delicate subject for many companies. More often than not, they are afraid of damaging the commercial relationship they have with their customers. Yet customer reminders are an integral part of the accounts receivable management process.
By optimizing this step, you can gain greater control over your cash flow. So, how do you go about customer dunning and achieve good collection? What are the best practices to adopt? How do you optimize customer dunning? We explain.
What is a customer reminder?
Customer reminder: definition
A customer reminder consists of formalizing a payment reminder to a customer who has not paid their invoice within the allotted time.
At this stage, you simply inform the customer that the payment date for their invoice has passed, and ask them to regularize their situation in your books. A customer reminder is not a formal notice. It is therefore an amicable collection operation.
In practice, companies make two or three reminders before moving on to the next stage, depending on the relationship with the customer and the amount outstanding.
Would you like to send a dunning letter to your creditor? Download our dunning letter template, fill in the essential information and send your letter.
The importance of customer reminders
Although it may seem tedious, dunning plays an essential role in the management of receivables and a company’s commercial relations.
In fact, a well-established customer dunning procedure makes it possible to :
- reduce payment times;
- reduce DSO (Days Sales Outstanding) ;
- limit the risk of non-payment, and hence debt collection procedures;
- control cash flow, especially unforeseen timing differences.
It’s also important to remember that most of the financial difficulties experienced by companies stem from cash flow problems. By adopting an effective customer reminder strategy, you can limit the risk of unavailable cash.
How to make a good customer reminder?
To make your customer reminder management easier and more efficient, it’s important to know the best practices.
Here’s what you need to know:
- Identify overdue invoices and the reasons why;
- plan an evolving follow-up message;
- personalize the message ;
- attach invoices to customer reminders;
- multi-channel management of customer reminders;
- choose a credit management tool.
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Identify overdue invoices and the reasons for them
First of all, to make a good customer reminder, your company needs to be fully aware of which invoices have passed their due date, which customers are concerned and the amounts involved.
Don’t make the mistake of dunning a customer who’s up to date. Likewise, don’t delay too long before sending the first reminder.
It’s also a good idea to identify the causes of an unpaid invoice. For example, you can check with your company’s sales department or after-sales service if there is an ongoing dispute with this customer. Customer dissatisfaction is a major cause of late invoice payment. However, it’s easier to find solutions in this case than if your customer is in financial difficulty.
In all cases, remain open to discussion and send a simple message. This is a reminder, not a payment order.
Plan an evolving follow-up message
The content of your reminder e-mail is very important. It must be clear and precise. However, the first reminder should be gentler than the last.
So, while the first reminder is a simple request for payment of the invoice, the last reminder is a firm reminder before a letter of formal notice is sent.
Your reminder e-mail is therefore intended to evolve over the course of the pre-collection procedure.
And if you want to reduce your payment times, don’t wait until invoices are due to remind your customers, as they rarely pay on the same day. In order to obtain payment of invoices on their due date, it is therefore essential to take action, and therefore to follow up before the due date.
Personalize your message
Just as your dunning message needs to be gradual, it also needs to be personalized.
Write your dunning message as you would any other exchange with the customer concerned. The idea is not to create a distance between you, but to inform the customer of the delay in paying the invoice.
You can also personalize your message by referring to a telephone exchange you may have had on the subject or concerning a dispute, for example.
Attach invoices to customer reminders
Enclosing invoices with your customer reminder e-mail is certainly the simplest and best practice.
In fact, by doing so, you enable your customer to quickly identify the unpaid invoice and therefore to proceed to payment more easily.
However, we don’t recommend attaching overdue invoices to dunning notices. In today’s increasingly digital world, it’s better to allow customers to access documents themselves, via portals for example.
Multi-channel management of customer reminders
Depending on your customers, a reminder by telephone or e-mail will be much more readily accepted than one by post.
Similarly, if you’ve done the first reminder by e-mail, you might consider doing the second one by telephone, so that you can talk to your customer face-to-face.
Varying the channels (telephone, e-mail, postal letter, etc.) you use to reach your contact will enable you to attract their attention in a way that’s best suited to their way of working.
Choosing a credit management tool
Using credit management software makes it much easier to manage the entire debt collection process, right from the customer reminder stage.
As the primary function of credit management software is to automatically send out reminders using the right media and formats, you’ll save a great deal of time in preparing, creating and sending your reminders, which will now be done automatically.
You’ll also have access to a dashboard that centralizes the main key indicators, and you can calculate your DSO in real time. What’s more, you can monitor the status of invoices, actions already taken and adjust the score for each customer.
Adopting a credit management software solution therefore enables your company to make its customer dunning process more reliable, to have precise data on its financial management and to save time.
Can customer reminders be automated?
It’s perfectly possible to set up an automatic dunning system. In fact, it’s highly recommended, to free up your teams’ time to deal with the most complex files.
What’s more, automating customer dunning makes the process more secure, since you can be sure that the action will be taken at the time you specify. For example, you can schedule the sending of a first reminder e-mail if an invoice is unpaid after 7 or 15 days, depending on your receivables management policy.
Collection software like CashOnTime enables you to script your debt collection process and create workflows. A triggering event, such as X days’ late payment, generates the sending of the first reminder e-mail and schedules another action depending on the customer’s reaction (regularization, request for extension or lack of response).
This is an invaluable piece of software that facilitates the work of your employees and credit managers, who have all the economic and financial information they need at their fingertips.
Automate your customer reminders with CashOnTime.
