A few weeks ago I introduced Sorriso Smart Pay and the success that one of our clients has achieved. Today I’d like to speak a little about credit card payments.
As a packaged food manufacturer or distributor you need to keep your prices in line with the expectations of retail outlets. And retail outlets want to pay in a way that’s most convenient to them, credit cards, debit cards, single-use cards, or bank accounts. The cost of credit card processing presents you with a dilemma, do you offer credit cards and increase prices so you can cover the expenses, and then offer a discount for bank payments, or do you just eat it? Will your prices be non-competitive? What about your margins?
Credit card expenses can be high. When a customer uses a credit card, you pay two sets of fees, a non-negotiable base fee that pays the card issuer and the card network, and then fees to the payment provider that gives you access to the network. Base fees average anywhere from 1.5% to 3.5% depending on the card used and your business type; you have no control over them. Payment providers charge a much smaller fee, often based on total expected volume. Accept cards and that mom and pop retailer will use their travel card to pay their $10,000 bill; and at 3.5% that would be $350!
With Sorriso Smart Pay, customers can use credit cards at no charge to you. As long as you also offer payment by debit card or bank ACH, 48 states allow you to recover your credit card fees through direct charges to the customer, up to 4% of the customer payment (2% for customers in Colorado).
When your customer’s billing or delivery address is in one of the 48 states (Connecticut and Massachusetts excepted), Sorriso Smart Pay will calculate, display, and charge the legally compliant surcharge. You keep your price competitive; your customer sees the fee before paying, they can switch to a different payment method if it’s too much.
Your CFO’s eyes will light up when your online A/R solution supports automatic payments.
With automatic payments, customers create a set of rules that monitor their accounts and then pay bills for those accounts automatically. Bills can vary in amount and arrive at different times, so automatic payments accommodate variability in customer spending. Rules can include when to pay the bill, pay the minimum due, the full amount, another amount, or up to a maximum amount. Automatic payment solutions keep customers informed of upcoming payments and issues using notifications, let customers change their payment rules to address cash availability, but are generally hands-off and happen without human intervention.
With automatic payments, the A/R department gets a good insight into cash flow for customers that sign up for the feature. With incentives such as discounts, automatic payments can dominate your customer’s payment methods and help eliminate delinquencies. It’s almost magic for your CFO.
Don’t confuse automatic payments with recurring charges supported by many payment providers. Where automatic payments are triggered by bill arrival, bill amount, and due date, and allow the customer to establish payment rules, provider-supported recurring charges usually charge a fixed amount on a specific day of the month and are used mostly for subscriptions. Automatic payments are a far more advanced feature, designed to handle variability in customer spending and payment dates.
During the Great Recession, one of our Financial Services clients used automatic payments as a way of bringing delinquent customers into compliance. They promised not to report the delinquency on their loan or lease to credit agencies if the customer set up automatic payments and made those payments for 6 months. The program was a success, bringing the vast majority of delinquent customers back into compliance within months.
Your customer’s experience is key, and how they view your bills makes a difference in how they understand your bills, their ability to request clarification or dispute charges, their proclivity toward early payment, and as a result, your cost to serve them.
Several factors determine the best possible presentation model;
Complexity — are your bills simple and always the same, or have variable line items and layers of charges?
Clarity — do your bills sometimes need clarification, like a first bill, change in service, or last bill?
Bill Type — is your billing based on periodic statements that sum up products or services delivered or invoices, where each delivery is paid separately?
Opportunity — do your bills present an opportunity for additional sales with individually targeted offers that vary over time?
Media — do your bills need to display properly on a variety of devices?
These factors determine whether a simple summary backed by a PDF of the bill or a more sophisticated and dynamic presentation with sorting, filtering, charts, and drill-ins makes sense.
In short, the more sophisticated and variable your billing, and the more you want to use the bill as a way to communicate timely, personalized offers, the more you’ll benefit from a dynamic presentation. A well-considered dynamic bill presentation can reduce calls and disputes AND create new sales, saving you time and money while improving cash flow.
But remember, always keep it simple. Give customers a quick summary and a quick way to pay. If it looks good at the top level, they won’t bother to drill in and you’re more likely to get paid early.
We've been helping some of the world's leading companies provide their customers with simple,
convenient digital self-service experiences since 2001. From interactive online billing to payment portals,
to multichannel customer communications, to personalized videos, we've mastered digital self-service software
for the smallest individual accounts to the largest business accounts.