If you mention converting existing accounts to Electronic Funds Transfer (EFT) to most family business owners, you’ll usually get one of three responses:
- “We know we should, but, we’re afraid we’ll lose our customers if we push it.”
- “We tried it on our slow-pay accounts and it backfired. If they don’t have the money, they don’t have the money.”
- “It’s working great!”
- Start Slowly – One company hand-picked three good customers to use for their first EFT customers. They did this for two reasons. First, they wanted to be sure they could internally handle the EFT process and that their accounting and bank links all worked smoothly before putting on more accounts. Second, they knew if they picked three very prominent customers in the community and it worked great, they would have wonderful references when they cranked up the program to the rest of their customers.
- To help sales personnel, another company developed a “cheat sheet” of common objections to EFT and listed the appropriate response to each objection. The sales people were also provided with supporting success stories and a list of reference companies that were using EFT terms.
- To get sales personnel educated, one company required each sales person work a few hours with their own payables accounting clerk. The sales people learned first-hand the time and money savings of paying vendors by EFT versus checks. When asked to sell EFT terms by telling customers how EFT was helping their own company, they were able to convince their customers of the same benefits.
- Success Starts With Sales Personnel Education – For companies that have successfully implemented EFT, the key to success was educating their sales people from the customers’ perspective. Most sales people fear losing customers when EFT is implemented. Or, they have the perception that EFT is only for “bad accounts” and would never dream of asking their good customers for EFT terms. Sales personnel need a thorough understanding of how EFT works at the customer site for any EFT program to be successful.
- Although all small businesses with accounts receivable seem to intuitively know that EFT is the way to go to speed up cash flow, not everyone has mastered the process. Through a series of conversations with small business owners across the county, here’s what we learned.
Their plan worked like a charm. The large accounts they selected were already paying other vendors by EFT and not only knew the process but were actually grateful for the terms change. The bugs on the accounting side were able to be worked out before adding more accounts. Finally, they had the three customers write letters of support that sales personnel could then use on calls to other customers. When the “little” guys saw that
these three “big” guys were endorsing the program, they figured it must be the thing to do!
EFT As a Sales Tool – One company found that they could not bid on two large accounts without offering EFT. EFT payment was a requirement on bids for a paper mill and for a General Motors subsidiary they were already supplying. The practice of requiring EFT terms for large, major and national accounts is a trend that all businesses need to be prepared for to stay competitive.
Don’t Rely on EFT to Cure Slow-Pay Accounts – A family business’ chance of success using EFT for dead-beat accounts is very slim. Even businesses who have successfully implemented EFT for good accounts report that EFT will not cure a slow or no-pay problem.
Via third party, we even heard a horror story about a small business who began using EFT, but through an oversight in the procedure, did not find out about NSF problems until six days after the original EFT date. By that time, he had several more loads out the door and ended up with a sizable bad debt. In today’s tech-connected world, it’s hard to imagine why the unsuccessful EFT took six days to show up, but the moral to the story is be sure to review your checking account daily and verify all EFT deposits.
Luring the Current Customer – A variety of “carrots” are used to lure existing check-paying customers into the EFT system. Many small businesses lengthen terms by 2 or 3 days for switching to EFT. However, one owner we interviewed shortened check-paying terms while keeping their existing longer terms for EFT accounts. Most owners report using a differential of two to three days to effectively entice customers to switch.
Another owner required EFT when existing customers requested increased credit lines. This strategy has led to most of the company’s largest accounts going over to EFT. Still another company will release personal guarantees if the customer will switch to EFT.
One company tried a statement stuffer in their bills. The stuffer explained the advantage of EFT, with an emphasis on avoiding finance charges. The stuffer, however, was not very successful. Only 1 out of his 1,500 customers requested EFT! This punctuates the fact that the customers paying finance charges are the ones that just plain don’t have the money on time.
Procurement Cards – One progressive company is taking the concept of EFT one step further. They supply several large utility accounts where a debit card is used to pay for the transaction. The utility pays the invoice plus a 1.5% to 1.8% add-on for the debit card fee that is charged to the company. Why would they do such a thing? Because the company has taken over the entire fuel management process for the utility, producing a significant savings. The program is so popular that the owner is getting calls from other utility companies across the nation to service their needs as well.
The bottom-line is that EFT works only with complete education and buy-in from yousales force. Get them sold, start slowly, and you’ll reap the reward.
