SMS & Payment Reminders: MessageMedia White Paper
Why use SMS for Collections?
Increase collections | Increase cash flow | Reduce costs
The old adage ‘cash is king’ is still true today, where cash flow is one of the critical components of business success. This is especially true for small and mid-sized organisations where cash flow issues have been shown to be one of leading causes for the failure of a business. If they survive, companies that continue to ignore good cash flow practices may find themselves in a position where they can’t make the investments they need to compete, or have to borrow money in order to function.
There are a number of practical steps businesses can undertake in order to better manage their cash flow such as collecting receivables, tightening credit requirements, increasing sales, discounting prices or taking out a loan.
In terms of collecting receivables, the primary goal is to recover debt or improve debt collection. The age of accounts receivable ratio will vary from industry to industry and business to business. There are a number of organisations carrying as much as 40% of their receivables over 90 days, and they have no clue how much of that 40% they can reasonably expect to see paid.
Shorten the Collection Cycle
There are many tried and true methods to recover debt and improve debt collection efforts, which include financial or administrative options such as offering a discount for early payment, or providing multiple payment methods and payment reminders. One simple method to shorten the collection cycle is a low cost payment reminder via short message service (SMS) or text message.
Anthony Stark, Head of Product Management, ANZ Pacific, said that they had piloted SMS in their collections and fraud division, and early indications are good…“Using SMS for collections had a great success so far with monthly ROI of 640%.”
Excellent Response Rates
As a communication tool SMS is immediate, non-intrusive and interactive. Another benefit of SMS is that 97 percent of all SMS messages are opened and 83 percent are opened within one hour. These are the main reasons companies experience good response rates using SMS.
Barry Ford, Managing Director, Powercom Pacific said that SMS is their front line tool to keep aged receivables under control…“We operate in one of the highest payment default industries in Australia, telecommunications. The flexible, easy-to-use platform enables my staff to send relevant reminders and overdue information direct to our customers. Without doubt, when we send messages to our customers, we get a response.”
Increase Customer Satisfaction
International studies  have found that SMS reminders improve on-time loan payments resulting in a 7‐9% increase in the probability of paying on time and the ‘average days late’ result dropping by two days a month. The results suggest that simple text messages help borrowers to better manage their repayment dates and can enhance customer relationships as they are perceived to be less threatening. SMS text messages were particularly effective for younger customers .
Other research has found that variables such as timing, framing and personalisation of text messages can also impact results. It was found that the most important factors leading to significant improvements in loan payments came from personalised SMS messages sent 24 hours before the payment was due. The greater the amount of customisation, including the name of the sender, the amount to be paid and the exact due date, the better the result. These messages were more effective than just using the client’s name.
Jason Gordon from Elders Insurance said that the informal yet direct approach of SMS makes customers more likely to pay on time…“We recorded a 25-35% improvement of on-time payments for insurance policy cover.”
Save Money on Printing Costs
Using SMS as a reminder will also save organisations money, as they can replace printed reminder notices, reducing administration, printing and postage costs, which for some organisations can exceed $5 per contact.
Text message solutions can be put into practice quickly, with easy to use web interfaces and text message software that automates the process, making it simple to send a single or mass SMS text message from a computer. Sophisticated solutions will also tag message responses so you know which message a contact is responding to.
Choose the Right Provider
There are a number of SMS service providers operating in the market today, and on the surface, it may seem hard to differentiate one from another. The key is to consider the primary SMS application you are looking to implement and ensure the service provider you select can deliver the best result for your needs.
If presenting your company as a professional organisation to your clients is imperative, look for a provider that specialises in B2B SMS services and offers a 100% gateway uptime guarantee. If your primary application is to execute a reminder program to shorten a collection cycle, gateway uptime is imperative because the SMS program is no use if the messages are not getting through when you send them.
You should look for a provider that can give you the option of integrating an SMS API into your business systems. This means you will be able to automate the whole SMS process so that no manual input from staff will be required, saving time and further improving staff productivity and administration.
MessageMedia is a global leader in business SMS services, and an award-winning customer focused organisation. The company provides a 100% uptime guarantee for the 18,000+ customers that depend on MessageMedia’s service reliability and quality support. MessageMedia customers improve business results by leveraging SMS solutions to communicate simply and economically. Contact us today.
1. Innovations for Poverty Action (IPA) in partnership with United States Agency for International Development-supported Rural Bankers Association of the Philippines-Microenterprise Access to Banking Services (RBAP-MABS) Program 2012