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Can't pay, won't pay....forgot to pay

From the Knowledge Centre

In our latest blog, we look at the main reasons why customers fall into arrears with businesses, analysing the responses given by the 1,500 UK households we recently surveyed...

We recently published our latest consumer research report ‘counting the cost of debt recovery’. Surveying 1,500 UK households, we examined their behaviours, attitudes and experiences in order to paint a true picture of UK debt collection. The report looks into who the nation’s debtors are and whether they match preconceptions, the reasons behind debt and how these might be mitigated, the most effective ways for businesses to recover arrears, which industry sectors most often get it right, which industry sectors most often get it wrong and the hidden cost of poor practice in terms of customer relationships and brand reputation. There were some surprising findings in relation to debt, in particular around the reasons behind overdue payments.

Forgetfulness the main cause of late payments
Whilst it could be assumed that not having the means to pay would be the overriding factor behind debt and late payments, in fact our survey revealed that nearly half of all payments (41%) owed to businesses are as a result of forgetfulness, 1.4 times more people fell into this category than those without the means to pay. In addition, further reasons not directly related to financial ability to pay were also cited by customers such as inaccurate billing (20% of people) and withholding payment at protest (6%).

Keeping communication lines open
With forgetful customers posing the biggest challenge for businesses, the importance of regular payment dialogue with customers cannot be underestimated. Early intervention strategies such as regular reminders and soft multi-channel communications before bill issue can help mitigate forgetfulness and prevent some customers from getting into arrears. It's about building relationships with customers and engaging them regularly, helping to make the process of payment as easy as possible for customers. Here, a proactive customer service mind-set can really add value, not only reducing the number of customers in arrears but also impacting positively on customer satisfaction.

Customer profiling is vital
Understanding the wide range of reasons for debt and why people fall into it is crucial for any business when honing their early arrears and collections strategies. Ultimately, everyone has the potential to fall into arrears at some point - whether its consciously or not - so not treating customers as individuals is neither fair nor effective. It’s important to know the make up of your customers and ensure agents are trained to adapt and tailor their approach based on this information.

The benefits of getting it right
The importance of getting collections right is something which simply cannot be ignored. Increased loyalty, repeat business, and more prompt payment can be expected if done properly. If not, companies face losing customers,
suffering reputational damage and customer disengagement. Ultimately, debt is always going to present businesses with a challenge. But this doesn’t mean they must sacrifice their reputation and customer relationships as a result. Understanding each customer’s circumstances, implementing tailored solutions, adopting a customer service mind set and keeping lines of communication open can result in both a reduction of bad debt and satisfied customers.

Debt is just another part of the customer journey - and it's essential that businesses recognise this.

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