Should I Send Monthly Statements?

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Clear and concise communication to customers is one of the more challenging aspects of the O2C cycle. Typically, the customer that makes the most noise (has the most past due) or orders the most product gets the lion share of the attention.  This works great for situations when your largest debt exposure rests with a […]

Clear and concise communication to customers is one of the more challenging aspects of the O2C cycle. Typically, the customer that makes the most noise (has the most past due) or orders the most product gets the lion share of the attention.  This works great for situations when your largest debt exposure rests with a few customers, but eventually, communication breaks down and some customers receive little to no communication beyond their invoices. So what’s the answer?

The monthly statement is a common method for gently reminding customers that they need to pay their invoices. Theoretically, it makes good sense. But, in practice, it fails on a few levels.  First, customers become so accustom to receiving their monthly statement that they completely ignore their invoice due dates and simply pay when they receive their statement.  This not only contributes to an unpredictable pay cycle, increased DSO and lack of available working capital, but it also creates a behavior with the customer- which leads to the second problem.

Customers that pay only on their statement are not good for a business. A late payment is just that, late. Allowing customers to go beyond terms, even if it is just a few days, so they can pay all their invoices at once, creates a behavioral stall tactic. Customers should not be reliant on their statement, when they already know about the debt and more importantly, when the invoice(s) is due.
 
The third issue I have is that a statement can be dependent on someone manually preparing the document to send to the customer. If you have created a case where the customer is behaviorally used to paying on their statement and the collector happens to be on vacation and misses the mailing, tack those extra days onto the late payment. You have also created an internal behavior to accept that when a customer pays late that it is ok, as long as they pay.

Another issue is that the customer statement may be the fourth or fifth attempt to contact them regarding the debt. I’ve seen cases where the invoice is sent along with the shipment, then a second copy is mailed ten days later, with a third and forth sent in the subsequent months. Finally, a statement wraps it up with a nice bow and gives them another thirty days to pay with no consequences.
 
I’ve gotten a bit “tongue in cheek” here, but frankly the monthly statement is a stall tactic and does not promote a healthy AR.  The fact is that the invoice should be enough documentation to obtain payment without further communication. If there is a dispute, collectors should be identifying those early to obtain resolution prior to the due date.  If a reminder is necessary, try a dunning notice. I’ve written many dunning notice campaigns and you can remind the customer of their past due balance AND clearly define what they need to do next (pay, dispute or expect to be placed on credit hold).
 
Ultimately the business has to stand behind the decision, whatever that may be, on how to communicate to customers their past due balances. Statements hold their hand and place total control on the customer on how and when they will pay you. Time to seize back that control and let them be accountable for their own process. 

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