Whiteboard Wednesday #17: How to make sure you get your money from customers | Clearhaus Learning
If you sell subscriptions, you may have experienced not getting your money from your customers.
This can happen for a lot of reasons but no matter why it’s a terrible situation to be in.
In this video, Maximilian from Likvido will talk about what you can do to get the money your customers owe you.
Hello and welcome to Whiteboard Wednesday, my name is Maximilian and I am one of the founders of Likvido. In this short video I’m gonna talk about what you can do, when you don’t get a payment.
l’ll start with this interesting number - or this scary number, and that says that if you run a subscription company, around 1.7% of your customers will actually churn each month, because of a payment mistake. So that’s actually not the number of customers churning, that’s just the number of customers churning, because there’s a payment issue. And that’s a huge number of churning.
So what are your possibilities, what can you do if this happens? The first thing you can do is, you can send them a very friendly reminder on an email and an SMS and you should to that, let’s say one hour, thirty minutes after you’ve seen the payment fail. So a couple of -and maybe I’m just showing one here, but this should be like a sequence of different emails and SMS, where you try to get people back and update their information.
So that’s the step number one and that should really help you to reduce the churn based on failed payments. Some people, they will not react to this, and then you need to start a dunning flow. And in this dunning flow you can start to have more serious voice or serious message and you can actually also start to add some some fees, which makes it more and more expensive for people not to pay and you can also add some interest rate on top of the original claim.
After the dunning flow, if you still haven’t gotten payment and especially if the claim you have is more than, let’s say a couple of hundred euros, then you can hand over the case to a collection agency. The collection process and the laws, they are specific for each country, but in most countries, this is the basic flow, which I’m going to explain.
Step number one is to hand over the case to a collection agency. And in most countries you can actually find collection agencies doing this ‘no core, no pay’. So most often you actually don’t pay anything for the collection agency, they will take over the case and they will start a legal debt collection process or a collection process. And they take all the fees the debtor has to pay, but you will actually get a hundred per cent or ninety per cent of the original amount that people owe you.
So that’s the standard collection process, and this goes on for a couple of weeks, so let’s say three months. After this period, there will still be people, who are not paying. And again, you look at the amount that people owe you, I would also recommend doing like a credit check, because the last thing you could do is one, you can go to enforcement court, or if there’s been a dispute, you can start a legal collection case. In most countries and most cases this process requires some more time and energy, because then you need to document your claim, you need to hire a lawyer, or work with a collection agency, who also does this or where they also can do this process and this just takes more time and it is more expensive.
So to zoom out, here - as soon as a payment fails, it’s very important to start a very friendly reminder flow with a sequence of emails and SMS. After that you can go into a dunning flow. Here you should look at the size of the debt and if you have a legal claim, and then start the collection process and after that for the largest claims you can go to court and start this legal collection process.
My name is Maximilian, my email is firstname.lastname@example.org, feel free to write me if you have any questions, and make sure to subscribe to this channel to get other interesting updates. Thanks for watching.