Last editedOct 20222 min read
In an ideal world, invoices would be paid accurately and on time, every time. Yet payment failures are part and parcel of the accounts receivable process, and when they happen, your business will need to initiate the payment recovery process. Here’s how to manage common issues including duplicate, overdue, and failed payments successfully.
What does payment recovery mean?
Payment recovery refers to the process used by businesses to resolve any payment errors. This includes chasing up on missing or overdue payments from clients, as well as recovering funds paid in error to suppliers. For example, you might overpay a utility bill or issue a duplicate payment for the same invoice, in which case you’d need to get in touch with the service provider to recover your overpaid funds.
How does the payment recovery process work?
There are two aspects to payment recovery.
Payment recovery process when dealing with suppliers.
When it comes to recovering duplicate or excess payments from suppliers, there are several ways to deal with it. The first step of the payment recovery process is to discover these errors by going through all invoices and payments to ensure they match. When errors are found, you’ll need to get in touch with the supplier to ask for credit or a refund.
Payment recovery process when dealing with customers
When it comes to collecting payments, the best course of action is sending payment reminders before they’re due. Automate your invoicing process using accounting software to send and track these reminders.
Once invoices go unpaid, you’ll then need to follow the payment recovery process by chasing up with the client. Send reminders at regular intervals, with any applicable interest and fees added due to late payment. You could consider setting up a repayment plan to help customers struggling with cash flow issues. After 90 days, many businesses turn to third-party collection agencies, factoring services, or even legal action to recover the debt. However, keep in mind that you will pay added fees which will take away from your bottom line. The final resort is to write off unpaid receivables as bad debt.
What is payment recovery software?
Like many business processes, software automates the payment recovery process to save businesses time and money. This type of software is used for tasks including:
Duplicate payment recovery
Failed payment recovery
Excess payment recovery
Payment recovery software sifts through payment files and data to find non-matching duplicates and other discrepancies. In the case of duplicate payment recovery, this might involve matching invoice amounts, numbers, and dates to determine what went wrong. Highlighting errors early in the payments process helps with failed payment recovery and overpayments. Businesses are then able to communicate more effectively with customers and vendors alike.
How to prevent failed and missing payments
The payment recovery process is complex, referring not only to duplicate payments and overpayments made by your own business but also to collecting payments from customers. Each failed payment adds to a business’s administrative burden, requiring investigation. Payment recovery software is one way to help catch invoicing errors and automate the process.
GoCardless can also help reduce failed payments. Built on bank-to-bank payments using Direct Debit, GoCardless has a low failure rate of 2.5% with the first collection attempt. By comparison, up to 10 – 15% of card payments fail. When failures do occur, the Success+ intelligent payments tool automatically retries payments on the best day to recover an average of 70% of these failed payments. By tackling the payment recovery process head-on, you can prevent customer churn, bad debt, and issues with cash flow.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.