When you have customers who are having trouble paying your bills, this has a direct influence on your own cash flow. To reduce the impact of unpaid invoices on your business, you can agree on a reimbursement plan with your client. Such a plan offers many advantages but takes quite a bit of time (and money if you call in the help of an external party) to set up and follow up afterwards. Thanks to the digitalization and automation of the process, you can easily use this solution, without having to put in a lot of effort. Your business will benefit from it and the result will be directly felt in your portfolio. For your customers, this is an interesting additional service.
In what cases can a payment or reimbursement plan be interesting?
When your customer cannot or does not want to pay you and the outstanding invoices are piling up, you can propose him a reimbursement plan. The amount owed can then be repaid in installments, which relieves the pressure on your client and gives you more certainty on (part) of your revenues. In addition, you are showing goodwill towards your customer, which will often be more rewarding than continuing to demand that he pays the full amount at once. A good understanding with your client will also allow you to develop a positive and lasting relationship with him.
When invoices are high, for example at the start of a project for start-up costs, for an exceptional additional effort or a significant annual cost, you can offer to split the invoice amount into periodic payments (monthly, quarterly, ...). This way you spread the weight of the invoice for your customer and you reduce your own risks. It is indeed more likely that your customer can pay you 4 times 1000 euro than 4000 euro in one go.
In this case, we are talking more about a payment plan than a reimbursement plan. You offer the customer a kind of long-term service very similar to the taking out of a subscription.
Is there a difference between installment payments for consumers and businesses?
For payments between companies, you can organize everything in consultation with your client. For consumers, you must take the Consumer Credit Law into account. Here, you will find a good summary to better understand the rules of consumer credits.
The advantages of payment plans or installment payments
For your customer
- Risk spreading:your client does not have to pay a large sum at a time but can spread the payment over a certain period of time. Consequently, this cost has a less significant impact on the financial situation of the company.
- By repaying the debt on the basis of periodic payments, recoveries from legal proceedings (and all associated costs) can be avoided.
- By spreading the payment of your bill, you often offer your customer the possibility of overcoming a difficult financial period.
- A plan can be adapted to the client's cash flow and also offers him some peace of mind.
For your company
- Risk spreading: the longer you have to wait for your bills to be paid, the greater the risk that you won't be paid at all. With a partial payment, you are at least sure that this part is settled. It is not uncommon to request a first partial payment at the start of the plan as a pledge of goodwill.
- Greater guarantee that you will receive your money:
- Promise of the creditor: when your client accepts the plan, he also agrees to pay the invoices. In addition, he will no longer be able to dispute invoices afterwards.
- Increase your income: it is more advantageous to convince a maximum of bad payers to make a partial payment than to continue to urge them to pay the full amount. Indeed, only a minority of customers will pay the total bill, while partial payments will allow you to significantly reduce the overdue amount.
- Good for your cash flow: by accepting partial payments you move your income forward. One euro received today is worth more than one euro you received tomorrow.
- Developing and monitoring a reimbursement plan is cheaper than using a collection agency or initiating legal proceedings
- If afterwards you still have to start legal proceedings, the judge will surely appreciate your goodwill and will be inclined to impose that the plan be followed and respected.
- Positive customer relationship: by listening to your customer, showing understanding for his situation and being flexible, you are investing in a future collaboration. A customer who is unable to pay at one time can become an attractive customer who pays well in the near future. This is how you build up a loyal and reliable clientele.
What steps must you go through?
1. Discuss the options with your client. Agree together within what deadline the total amount must be repaid, over how many installments this amount will be spread, when each installment will have to be paid, etc. Make sure the reimbursement plan is workable for your client. If the reimbursement is too heavy, your client may well be paying you too late or not at all. It is therefore preferable to increase the length of the reimbursement period and to reduce the reimbursement amount instead of aiming for large non-recoverable amounts. In the case of installments, you don't necessarily have to talk about a reimbursement plan, as this can sometimes have a negative connotation.
2. Prepare the plan, have it signed by both parties, and digitally store it or save it somewhere else.
3. Make sure your customer pays periodically. Send a payment reminder (by email or letter) or work with partial invoices. For this, you must remember when they should be sent (calendar, reminders, tasks, spreadsheet, ...). We strongly recommend that you use direct debit mandates to manage this.
4. Payment follow-up
- Check that the payment has been made (check your bank account or accounting program).
- Send an e-mail or a reminder letter or contact your customer by phone if you do not receive the payment.
- Follow the situation closely and repeat your follow-up actions if necessary.
As you can see above, creating and especially monitoring a payment plan represents a considerable administrative burden. You can hire a bailiff or collection agency to handle this, but this of course will cost you money. How can you solve this problem yourself more effectively?
Optimization of the process
If you can digitize and automate this process, you will save a lot of time and money. Thanks to our core business, namely the easy online signing and storage of direct debit mandates and the transaction traffic through these mandates, the Twikey solution perfectly meets your needs in this matter.
A recurring direct debit reimbursement plan is the perfect format for you to close a valid legal agreement with your customers to automatically withdraw payments from their bank account. By signing a SEPA direct debit mandate, they give you the power to automatically collect the amounts due. Twikey allows you to sign these mandates directly online, which saves a lot of time and reduces the additional costs inherent to payments. Signed mandates are stored on our online platform. Here you can also set up flexible plans to cash out automatically. Finally, it is also possible to set up an automatic dunning process when the amount could not be collected. All this allows you to be paid easily.
How does such an online flow work?
1. Have a direct debit mandate signed online.
Via Twikey, your client can easily sign a direct debit mandate online within a minute. You can already prefill a large part of the document yourself so that your client’s input is reduced to a minimum.. Your client goes through a number of screens, in your own house style, and signs with the signing method of your choice. The mandate is stored in your Twikey environment.
2. Configure the agreed reimbursement plan in Twikey.
You can prepare and plan all the transactions that need to be sent to the bank in advance.
3. Transactions are automatically sent to the bank at the times you defined.
4. The money is collected and deposited directly into your account.
5. Payment follow-up:
- The collection was successful: in Twikey, you will find an overview of all transactions
- The collection failed: you have the option of starting an automatic dunning process. Here, you define the steps to be followed by our system in the event of a collection failure (for example, send the transaction once more to the bank, send an e-mail to your customer asking him to check the balance of his account, send an e-mail to yourself to remind you to call your customer, ...)
Higher estimate of the risk of non-payment?
If you are in a B2B context and you doubt that your customer will continue to pay you, you can always opt for a B2B direct debit instead of a Core debit. This offers the additional certainty that your customer can no longer exercise his eight-week withdrawal right after the amounts have been collected. Read our articles on the benefits of B2B direct debits or on how to easily conclude B2B mandates online for more information.
We hope this article has given you a better idea of the benefits that reimbursement plans and installment payments can have for your business, especially if you can manage and automate the process yourself.
If Twikey can help you, or if you would like more information on what we can do for your business, please don't hesitate to contact us.