How Is The Private For-Profit Company Formed Question 5 Options Processing Recurring Payments: Get Paid in Full by Automating Receivables

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Processing Recurring Payments: Get Paid in Full by Automating Receivables

In any business endeavor, an owner may encounter many sweaty palm experiences. Customers can engage in a number of attacks from harshly criticizing a product or service, criticizing the (lack of) customer support, objecting to the delay in the delivery time of said product or service and the airing of many other complaints. Of course, an owner knows that this comes with the tricky territory of running a business. However, it remains a humbling experience when dealing with an aggressive client – an individual who will inform everyone from friends and relatives to the Better Business Bureau about perceived shortcomings in the business.

Perhaps the most frightening situation affecting a “not all is what it’s cracked up to be” business owner is a payment that is late or never arrives. Consider the private school owner who reminds a parent about the monthly fee only to receive this response: “Just give me a few days.” Imagine an entitled construction company owner who seeks a periodic payment from the client and is dismissed with “I’ll pay you when I can.” Imagine a gym owner who has to do back flips just to collect the monthly payment.

Whether by choice or even necessity, there seems to be a bandwagon of customers who are not so easy to leave with their money regardless of their responsibility or what is morally correct. This unfortunate situation (ie, when an owner can’t collect the money it needs) can seriously hinder cash flow — a business lifeline, vital to its vitality. If the costs of the business are greater than the revenues (negatively affected by late or non-payment), commercial failure is guaranteed.

There are two main ways to deal with an unwanted client whose money remains elusive. Many businesses still embrace the collection process — whether they do it in-house or contract with outside agencies. If the business chooses to contact the client directly, invoice after invoice can be sent which is labor intensive and expensive. The employer must consider the cost of invoices, postage, late notices and collection calls, and the time required for staff to perform this duty (and the concurrent salary/benefit accruals of those staff). Outside collection agencies are not necessarily a viable alternative. They usually keep at least 25% of the owner’s applicable profits.

The second approach to managing cash flow-challenging customers is based on the premise that the business owner must be proactive. He needs to realize the benefits of automated payments, and how this process can more easily prevent the “Dear customer, please pay me” letter.

Automated payments are a vehicle where a customer’s account is automatically debited and transferred to the owner’s account on the exact payment date. In deciding to buy a product or use a service, a prospective customer signs a simple release form, which gives permission to transfer payment on a specific due date. The customer chooses how to pay, preferably by check or credit card.

The operative question arises: How are the funds transferred from the customer to the owner? There are two main ways when check processing is involved. An alternative is through paper drafts that can be issued through the appropriate software and delivered to the owner so that he can deposit them (like paper checks) or sent directly to the owner’s bank. . The processing company obtains the customers’ banking information and converts the information into the appropriate bank draft.

An owner may decide to alternatively use a web-based interface, a virtual terminal, to simply input customer information in an easy-to-use program. (Here, data entry is done at home). The data is automatically converted into the required format, and processed through the ACH (Automatic Clearing House) system. It usually takes two to three bank days to complete the transfer. In the scenario where a check is NSF, some companies use an auto collection feature that will automatically resubmit the check two additional times, if necessary. This feature not only saves the owner time and money, it can also completely prevent the rather embarrassing process of collecting the NSF item.

Recurring credit card payments can also be processed using a virtual terminal. Such terminal must include editing features so that customer information can be changed, added or deleted as needed. In addition, a virtual terminal provides a complete transaction history of all transactions run by the system.

There are many advantages using an automated payment system: It ensures reliable cash flow, reducing costs such as sending invoices or contracting collection agencies, settling funds in a timely manner , streamlining the billing process, and more. Andy Grove, former President & CEO of Intel Corporation, understands the aforementioned benefits. A few years ago, he said, “In the same way that we see a great flow of content on the Internet, we will see the transfer of automatic payments in the market.” Any smart business owner should be an active participant in this transition.

Copyright 2006 William Hamilton

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