May 22, 2014 •Brian Watson
Let’s face it: statement design just isn’t a top-of-mind concern for most revenue cycle professionals.
And that’s, well…fair enough. When you’re spending most of your time frying bigger fish – tracking DSO, supervising cash management, overseeing financial reporting – customer-friendly statements can seem like low-hanging-fruit.
But you probably don’t need any convincing that timely revenue collection is integral to your bottom line.
Not when over half of Americans have reported paying a bill late.
And while I’m not going to argue that designing a statement that’s simple and easy-to-understand is the key to collectability – or even one of the most important reasons behind faster payment – statement design does matter.
Bills that have clear takeaways – what’s owed, for what, and by when – and use proven design techniques to control eye movement throughout the statement remove a significant roadblock to payment.
And statement processing affects a lot more than just cash flow and bad debt.
Upwards of 40% of inbound customer service calls are billing related. And those calls can be contentious and hard to resolve – tying up staff and driving up collection costs that quickly cut into revenue.
Not to mention that, as it’s often the virtual “handshake” at the end of a transaction, bad billing is in a unique place to muck-up customer relationships. Like a great joke with a badly mangled punchline, subpar billing can be the source of customer confusion and frustration that quickly turns a pleasant transaction into a negative experience.
All that underscores the value of smart, carefully considered statement design.
Far more than just ink-on-paper, clean, clear, well-designed billing – whether it’s an account statement, billing invoice, or past-due letter – is truly mission-critical stuff.
Bad bills on the other hand? Well, they can do a real number on your balance sheet. Here are five reasons why it makes sense to stay on top of what your statements look like and how they communicate with customers.
Bad Bills Slow Receivables
Poorly designed bills are typically poorly understood bills.
Pivotal statement information can easily be de-emphasized by less-than-ideal communication (too much detail, widespread use of bill-speak jargon). Or design snafus (statement flow that distracts from the most-desired-response, e.g. bill payment). Or accuracy issues (account info is incorrect, outdated, or misleading).
And customers typically deal with billing confusion by choosing one of several equally problematic options: contact customer service for clarification, simply put off payment until closer to the due date, or – in a worst case scenario – opt to do both.
All told, it’s pretty difficult to put a positive spin on any of those outcomes.
True, placing a call to customer service will likely get the problem resolved and a payment made. But it also increases revenue cycle overhead and can potentially lead to customers forming a negative option of their overall business experience. And any payment delay adds days to A/R and harms overall financial health.
The point is that faulty billing not only damages overall cash realization and key revenue metrics. But it also can frustrate customers. Increase costs. And siphon revenue from your bottom line.
Bad Bills Add to Administrative Overhead
Bad bills can be conversation starters. But that’s not a good thing for your business office staff (or your budget).
It’s a cause-and-effect proposition. The more confusion that your statements create, the more calls your service reps will have to field. And the more you’ll be forced to spend on call center training, staffing, and management.
All of which has a serious effect on profitability.
And until you’ve factored in all the implicit, performance-related costs that are associated with statement print and mail – call time and frequency, customer service overhead related to bill troubleshooting, along with traditional measures like Days in A/R and bad debt – you won’t be able to come up with a true, brass-tracks representation of just how much your statement processing solution of choice actually costs.
Bad Bills Increase Print & Mail Costs
Statement processing isn’t exactly cheap.
Postage is on a steady incline. And materials costs, like paper, ink, and envelopes, continue to reflect the sting of inflation in commodity prices.
Yet for a small subset of customers, one statement simply won’t be enough to get the job done. Past-due accounts need at least one extra bill. And if they remain persistently delinquent, perhaps several.
The upshot from these repeat billing offenders? Higher statement print and mail costs.
That’s why it makes sense to do everything you can to get things taken care of with the first statement. Sure, there are some bad actors out there that are simply unwilling to pay what they owe on time. In which case good statement design is going to have little effect.
But there are also customers out there who are legitimately struggling with bill details: what’s owed and why.
And customers that can’t understand a statement or dispute its bottom-line aren’t likely to race to their checkbook to send you a payment.
Good design not only encourages faster payment, boosts customer satisfaction, and slashes administrative overhead, but it can also mitigate many of the multi-statement transactions that increase statement processing costs and stealthily take aim at your profitability.
Bad Bills Harm Customer Satisfaction
Customer dissatisfaction has clear and far-reaching effects on profitability.
Conventional wisdom holds that it’s 6 to 7 times more expensive to add a new customer than it is to retain a current one. The average annual value of a lost customer is $289. And studies by have shown that a 5% increase in customer retention can yield anywhere from a 25 to 100% improvement in profits.
All good reason why, now more than ever, customer loyalty is king. It’s no longer enough to offer an experience that’s just solid. Not with the Internet fundamentally adjusting how we shop for, price, and purchase goods and services.
It’s simply too easy to find, and switch to, comparable alternatives. For example, the average U.S. business will lose anywhere from 10 to 30% of its customers each year, and a whopping half over a five year period.
The point: everything that makes up your brand – products, service, people, even billing – is being meticulously, ruthlessly judged by your customers. And it’s completely unacceptable for a successful transaction to be undermined at the last minute by financial correspondence that leaves a bad impression on customers.
So while you’re smartly investing time and resources in upgrading your products, your services, and your customer support practices, neglecting the small stuff that completes the process – like statement design and print and mail services – is a definite oversight.
One that can have very real consequences on key performance indicators like customer loyalty, satisfaction, and brand preference.
What You Can Do About It
Fortunately, smart statement design doesn’t take a complete revenue cycle overhaul or an expensive software installation.
Just a commitment to simple, clear, clean correspondence that quickly provides customers with key billing takeaways – what’s owed, for what, and by when. And proven design concepts that manage eye movement and clearly highlight the billing information that’s most important to the payment process.
Want to get a head start on building a better bill? Download our free statement design guide to learn the six effective design concepts commonly shared by best-class billing.
Or schedule a free design consultation with the statement processing experts at Elite.