For HVAC companies that invoice clients after a job is completed, uncollected and uncollectable debts can become a serious drag on an otherwise successful business. Unfortunately, outsourced debt collection — the finance world’s primary tool for fighting collection issues — is neither particularly effective nor palatable in an industry where reputation management is paramount and interconnected customers often exist for several years.
They say necessity is the mother of invention, and the lack of good collection management techniques have led some creative HVAC companies to turn to a payment tool designed to help minimize collection issues not often used in their industry — recurring billing.
TECHNIQUE NO. 1
Take mobile ‘trip charge’ payments with recurring authorizations — Many HVAC companies prefer to invoice customers via mail after the job is completed rather than accept full payment at the time service is rendered. There are a variety of valid reasons to do so, such as saving field staff’s time, limiting the number of hands that handle the money, saving credit card processing fees, and increasing customer convenience.
But, over the last few years, the reasons to get paid exclusively via invoicing have weakened as mobile payment technology has advanced. Mobile payment processing via a swiper that plugs into a technician’s cell phone and securely processes and deposits funds directly into the business owner’s bank account, such as Square, have become dramatically cheaper over the last few years. This technological advance allows companies to consider taking payment for a small trip charge at the time of the sale via a mobile swiper, which provides you with an opportunity to have the customer sign an authorization that not only covers the trip charge, but also allows companies to revert to recurring billing for invoices that aren’t paid on time.
TECHNIQUE NO. 2
Offer payment options for overdue invoices with recurring billing — If you don’t want to accept a trip charge or other incidental charge via a mobile device at the time of service, you can instead adopt a similar strategy on the back end after an invoice has gone past due. Under this scenario, you’d simply empower your staff to set up a payment plan with the customer, which includes an authorization for recurring billing when making calls on overdue accounts.
SOFT BILLING DESCRIPTORS
Under either scenario, obtaining that recurring billing authorization from the overdue customer allows you to charge the customers’ credit cards monthly in much smaller increments than the total bill, thus dramatically improving the likelihood of a partial or full payment of the overdue account over time. No matter what technique you take to inject recurring billing into your overdue invoice strategy, it’s important to follow best practices. That means using soft billing descriptors, which is the technical term for making sure that what customers see on their monthly credit card bills clearly describes your business, includes your company phone number and identifies that the charge is for an overdue invoice. That way, you eliminate any chargebacks based on customer confusion. Additionally, best practices dictate you should consider using a credit card processor that offers authorization recycling, which means your processor will use an algorithm to improve the chances your recurring billing authorizations are successful, ultimately improving the chances you quickly recover all your money.
Dealing with overdue invoices and collection issues is difficult in any business, particularly when reputational concerns are as high as they are in the HVAC industry. By obtaining customer authorization and then implementing recurring billing to recover overdue invoices, you can better ensure your business is paid for services it rendered without having to revert to sending past (and potentially future) clients to third-party debt collection services.
Publication date: 10/26/2015