Statement Processing and Distribution: Paper Predominates, but Alternative Methods Are Gaining Traction
Processing and mailing statements (and invoices) is time consuming and costly. As a consequence, third-party service providers are now offering to take the burden off your hands, and by doing it more efficiently, save you money and time. Another alternative is to move to electronic distribution, which offers even more cost and efficiency benefits. Lisa Childress, Corporate Credit Manager for Bison Building Materials, Houston, Texas, says that "online access to statements and invoices and delivery information has saved our company a tremendous amount of money in postage and re-printing of lost/missing invoices." Consequently, in light of these improvement opportunities, we were interested to find out how credit departments were handling statement processing and distribution. In so doing, we also wanted to benchmark standard practices as well as uncover any innovative approaches to special situations. We are also interested in credit department trends in regard to the use of third parties for statement processing and distribution as well as for the use of electronic distribution.
With only 8 percent of those responding indicating they were generating at least 10,000 statements at a time, and 19 percent at least 5000 per run. One fourth of the survey participants reported that they do not send statements at regular intervals. Of the 75 percent that do, however, we were not surprised that monthly was the most common interval, at 77 percent, followed by "As needed or Requested" at 10 percent and then quarterly and weekly at 4 percent a piece. The chart below illustrates the popularity of the different statement frequencies reported.
|
|
Clearly, statements provide value when used outside of the typical month-end routine. "We have a number of accounts that are on various contracts with us, and we mail statements to them, at least two weeks in advance of their first of the month due date. This practice has considerably sped up our cash flow on these accounts," says Randy Clark, Assistant Division Manager/Credit, Young Electric Sign Company, Las Vegas, Nevada. By the same token, there are times when it is not appropriate to send a statement. Seventy-seven percent indicated they do not send statements to all customers. The reasons and percentages for not sending statements are listed in the table below.
Just 10 percent of the respondents report that their customers primarily pay by statement as opposed to by invoice. Of those that do, 32 percent were selling to construction related contractors, 24 percent into the automotive aftermarket, and 12 percent to consumer goods retailers. The remaining 32 percent were spread across a variety of industries. The common denominator seemed to be industries with frequent sales to small businesses. As expected, the most common method of transmitting statements was through the mail (49%), but a very substantial number of trade creditors are using fax (15%) and email (20%) (See chart below.)
Another 16 percent distribute statements by a combination of print and mail, fax or email. It was a bit surprising to see that email surpassed fax in popularity, further evidence that credit departments are moving away from paper to electronic systems.Do It Yourself Still Predominates
Most credit departments still do everything themselves. Only 15 percent use a third party to process and distribute statements. Even fewer, 13 percent, use a third party to process and distribute invoices. A slightly larger number, 23 percent, provide their customers with online access to invoices and statements. Interest, however, in implementing online customer self-service tools was modest at best. A sizable majority, 63 percent, indicated no interest in providing customers with online access in one form or another. The primary features most credit departments provided in terms of online customer self service was invoice (88%) and statement/account balance (86%) look-up. Access to supporting documentation (21%) was a distant third. Partial Payments and ACH Payments were next at 19 percent, with credit card payments offered by only 9 percent of those surveyed. We did not ask specifically, but the similar response to the ACH and partial payment choices indicates that most of the respondents offering a payment option accept partial payments. This suggests a fairly high degree of sophistication in terms of the payment solutions that have been implemented. In contrast, the fact that more payment solutions facilitate immediate payments rather than allowing customers to schedule future payments indicates we still have a way to go. Dialight Corporation, Farmingdale, New Jersey has gone the software route in order to implement a sophisticated online customer self service solution. Linda Flannery, Credit Manager, explains, "Our EAX Web Program is designed from a software package called 'Progen Websmart.' (See http://www.bcdsoftware.com). This program was designed for Dialight by consultants for its Mapix AS400 system. Said Flannery, "We have received only positive comments from our customers using this new program.
Besides statements, they can print invoices, obtain packing lists and PODs, and email invoices and such directly to their buyer's." When we asked about the customer self service features credit departments intend to implement, some of the above shortcomings were addressed. Credit card payments rated as high as ACH payments (44% each). There was also considerable added interest in dispute notification (39%), which only showed up 14 percent of the time among those that had already implemented online customer self-service features. There was no vendor that was popular among a significant number of respondents. Several were using local firms that provide mailing services or imaging technology. Fifteen different vendors were mentioned and are listed in the table below.
Boosting the Value of Statements
The primary reason cited for not bothering to send statements in any format is that they have little impact because customers pay by invoice and otherwise ignore statements. If however, you make statements part of you dunning arsenal, quite a few respondents reported ways to increase the impact statements make. Among other things, they highly recommend marking statement up with stickers, stamps, highlighters, or notes written in colored ink. Larry Lederman, Credit Manager with the Gallery Marketing Group, Niles, Illinois , notes, "We use a series of stickers from funny to severe, depending on the balance due and the length of time an account is delinquent. We get excellent results from this." A similar endorsement comes from David Osburn, Director of Credit & Collections for Easton Sports Inc./ Riddell Sports Inc., Van Nuys, California. He adds, "For accounts with invoices over 30 days past due, on the statement, we highlight the invoices, or place hand written notes, stickers, or stamps to call attention to the past- due balance.
In some cases we are known to even copy the statement onto brightly colored paper to make it stand out in a pile of white paper. All of these are very simple, but yield excellent results. The small price of a stamp and a few minutes spent on a statement is well worth the return on investment."|image7| You can do similar things with electronic invoices or statements as well. Daryl Lawson, the Billing, Credit & Collection Manager at Squire, Sanders & Dempsey, LLP, Cleveland, Ohio relates that "Some of our invoice formats actually have mini statements included." In addition, a number of collection software systems will automatically generate highly customized messages on statements or appended to a statement to better catch the customer's attention. Processing and distributing statements should not be a mindless exercise. Clearly there are multitudes of ways to derive added value from the innovative use of statements. Likewise, now more than ever, there are opportunities, derived from being more efficient, to reduce the costs associated with statement processing and distribution. Credit pros are well advised to periodically review their statement handling policies and procedures to ensure best practices are being observed.
|
Webinars
