For software vendors, securing payments from buyers is often one of the most challenging aspects of doing business. Whether dealing with small startups or large enterprise clients, payment collection is rarely straightforward.
Many vendors encounter problems after contracts are signed, with some buyers hesitating or even refusing to pay. Late or missing payments impact every part of a business, from product development and marketing to sales and the bottom line.
Today, we’ll address key payment challenges faced by software vendors, and explore best-practice strategies that can help mitigate these issues.
What payment challenges to software vendors often face?
- Late payments
Over 50% of invoices are overdue. This means that companies often face cash gaps or dire straits when customers pay late. Late payments could be a result of a customer’s limited cash flow, a poor invoicing and collections process, or a lack of payment reminders and simple payment options.
Late payments can pose a major issue for companies of all sizes. Smaller companies may see difficulties with late payments because they rely on customer payments to keep the lights on. Larger companies may have a larger number of open contracts, but may also have contracts that are larger in size.
Solution:
Mitigate late payments through a multi-pronged approach that includes automated invoicing, automated reminders, and custom-built nudges that encourage your customers to pay in a timely fashion. Bespoke reminders can often get through to customers more easily than boilerplate language, as it shows a personal touch.
Experiment with the timing of your reminders and follow-up emails in order to identify the reminder cadence that gets you the best result possible.
- Failed credit card payments
Small businesses or individual buyers often rely on credit card payments for software subscriptions. However, credit card payments can fail for a variety of reasons, including expired cards, insufficient funds, or issues with the payment processor. For vendors, this can mean missed revenue and added administrative costs to follow up with customers. This situation is exacerbated when small buyers do not have established credit histories or are operating on tight cash flows.
Even larger buyers can exhibit credit card issues, especially following major structural changes, such as mergers or reconfigurations.
Solution:
Automating payment reminders and setting up multiple payment options (such as ACH, bank transfers, or PayPal) can reduce the risk of failed payments. Additionally, offering flexible payment plans or subscription plans may make it easier for smaller clients to meet their financial obligations.
This is also true for larger clients – ACH and bank transfers can be a more reliable way to get timely payments. Many payment partners offer auto-payments that can increase cash flow reliability both for you and your customers.
- Billing cycle disputes
A third common challenge arises from disagreements about billing cycles and payment schedules. Clients, especially larger ones, may attempt to shift the terms of the billing cycle to align better with their internal cash flow, leading to delays in payments or even disputes. In some cases, clients may want to delay payments until they see results from the software, even if they are contractually obligated to pay on a specific schedule.
Smaller clients may be dealing with late invoices of their own, impacting their cash flow and liquidity and making it difficult for them to pay on time. This causes a ripple effect between companies as everyone works to get their invoices paid.
Solution:
Clear communication and transparency are crucial here. Vendors should ensure that billing cycles and payment terms are spelled out clearly in the contract from the beginning, including agreed-upon dates for payment and any penalties for late payment. Setting up automated invoicing and payment systems can help ensure that both parties stay on track and reduce any ambiguity about when payments are due.
Work with your customer to create an automated payment schedule that fits between other payments they may have to make. While automated payments can pose challenges to buyers, they can also help finance teams more accurately forecast, which is a win for everyone.
Proactive strategies to improve payment collection rates
- Use automated billing systems
Automating the billing process can save time and reduce human error. Automated systems send reminders, process payments, and follow up on overdue accounts. This can be particularly helpful when dealing with clients who are prone to delaying payments or forgetting due dates.
A strong automated billing system will allow you to personalize bills and reminders, offer co-branded communications, and offer flexible options to your customers as needed. Financial situations are prone to change, but strong customer service is grounded in flexibility and a willingness to jointly problem-solve.
Automated systems allow you to streamline the communication process, offer helpful reminders, and get paid directly. An automated system in conjunction with a strong pricing model can even increase customer loyalty and retention.
- Offer multiple payment options
Providing flexibility in how buyers can pay (credit card, ACH transfers, etc.) can help reduce friction during the payment process. Offering a range of options ensures that clients can choose the most convenient or efficient method for their business.
Convenience is the heart of reducing buying friction, and customers will always be drawn to simple, straightforward payment options that function well within their existing workflows. Capchase Pay offers multiple payment options that help you meet customer needs and provide a more seamless payment process.
- Offer flexible payment terms
Offering flexible payment terms through a partner platform can be an excellent way to close deals faster and higher while also working with customer needs.
Many buyers choose to walk away from a platform they really need due to budget constraints. In today’s market environment and increasingly-competitive SaaS marketplace, it’s harder than ever for companies to justify expanding their tech stack when it comes with a hefty annual price tag.
Capchase Pay allows you to offer customers monthly, quarterly, or custom payment terms, so they can pay in manageable installments. Whether your customer has a smaller budget or they’re focused on staying liquid, Capchase Pay’s flexible payment terms can be the final push a customer needs to close a deal.
How Capchase Pay empowers your growth with flexible payments
Capchase Pay increases B2B SaaS revenue by empowering vendors to offer flexible payment terms.
Integrating seamlessly with your workflows, Capchase Pay presents a co-branded checkout that allows your customers to choose the payment schedule that works best for them.
Then Capchase takes it from there, managing billing and collections behind the scenes.
Most importantly, Capchase Pay gives you full Annual Contract Value upfront, so you can have cash in hand to power the next stage of growth for your company.
How does Capchase Pay collect payments?
Capchase Pay takes care of payment processing without any manual labor required on your part.
- Track payment status in the app
Check the status of your customer’s most recent payment in the Capchase Pay finance panel so you remain up-to-date.
- Communicate with your customers
With flexible co-branded communication options, vendors can opt to be hands-on with the collection process, or leave it to us. Our process is best-in-class and we’re always happy to fully manage collections on your behalf.
- Enjoy our 90%+ collections rate
Our proprietary underwriting process evaluates buyers prior to purchase, and has resulted in a seamless and successful collections track record.
- Save time and money
Free up your finance, sales, and customer success teams to focus on more important tasks, and leave chasing invoices to us – it’s our specialty!
Effectively collect money from customers with Capchase Pay
Interested in learning more about how Capchase Pay can boost revenue for your B2B SaaS company? Our team would love to tell you more – book a meeting!
