A business that automated their payment processing has significant advantages in comparison to one that traditionally invoices and then waits for payment. Estimates vary regarding the cost of a traditional invoice from $3 to $8 per invoice.
Consider two security alarm monitoring businesses. Both have 5000 customers they bill at an average of $40/month. ABC Alarms has done business the same way for 15 years. They print and mail invoices every month and wait for payment to be mailed back. They receive checks throughout the month and virtually every day staff makes a trip to the bank and then manually reconciles payments for accounting. ABC has a regular “collection week” effort to call those past due accounts.
Contrast this with Alert Alarm, a company that has automated their payment collection process. 80% of their customer base is billed on an AutoPay program. Alert knows that each month they can count on $160,000 hitting their bank account electronically. In addition their accounting is reconciled in an automated way as well.
Alert has distinct competitive advantages over ABC including more reliable cash flow, reduced labor and banking fees and significantly reduced invoicing costs. Alert can afford to pay more to retain the best employees. In addition when an opportunity to buy another alarm company presents itself has the financial wherewithal and systems in place to expand.
It is clear an automated payment plan is a must for any business collecting recurring payments but how do you choose a provider? Consider these 6 questions you should ask your payment processor [Third Party Processor or TPP]:
- Do they offer a single platform for both ACH and credit card processing? It does not make sense to use two payment platforms when you should be able to get both ACH and credit card payments processed from one TPP.
- Is the Third Party Processor committed to technology investment? The payment landscape continues to evolve. PCI compliance, ACH rule compliance, automated email customer notification, payment exception handling and payment gateways are just a few of the many challenges a TPP must deal with and meet head on. You must be wary of the provider whose platform or methods have not changed or evolved.
- Are the reporting tools provided going to meet/exceed your business needs? There should be multiple ways to view transaction histories, download payment reconciliation files etc. Real time access to transaction activities is a must.
- Is there a dedicated support staff? You should have a client service team and technical support as well. Not being able to get answers to payment related questions can be stress and anxiety causers.
- Does the third party have multiple back end processing partnerships? ACH processing typically necessitates you have a bank [ODFI] partner. If your TPP only has one and something jeopardizes that bank partnership your TPP loses the ability to process transactions. This exact thing has happened to various TPP’s in the recent past. Multiple credit card back end’s offer the same benefits and potential cost inefficiencies.
- Does the Third Party Processor provide tools/education to help your business maximize participation rate in an AutoPay program? Simply having the ability to process recurring payments does not translate into your customer base adopting this payment vehicle. A specific plan to encourage adoption by your clients is an important part of the automation goal.
A business can literally transform itself by implementing and maximizing an AutoPay program. The long lasting financial benefits make a compelling case to get your business started as soon as possible. So ask the 6 questions above and get your business automated.
For more information on automated payment processing you can contact us or call 888.729.4968.