Friday, June 18, 2021

Round Down Accounts Receivables

In rounding up from your debtors overdue payments, you’ll want to minimize the necessary force. Best to keep it easy for them to do right. Researchers at Seattle University, Rutgers University-Camden, and Microsoft Corporation say that one way to accomplish this is to state the overdue amount to end in a 0 or a 5, rounding down the full amount as necessary.
     For amounts under $10, this meant using either a whole dollar or 50¢ ending. For other amounts less than $1,000, this meant using a $0 or $5 whole dollar amount. For amounts of at least $1,000, $50 and $100 endings fit the rule. The researchers analyzed use of these rules in contexts ranging from library fines to cable TV services to credit card bills.
     The technique works because when people are under stress, rounded numbers are easier for them to process than other numbers. Because we’ve five fingers on each hand and ten fingers total, our brains find comfort in processing numbers ending in 5 or 0. The debtor is more likely to pay attention to the dollar amount, and paying one’s attention is a necessary step toward paying one’s money. Along with this, because numbers ending in 5 or 0 stay in the brain better than numbers ending in another digit, the responsibility for the debt stays closer to the front-of-mind.
     The facilitation of payment is measurable, but this does not guarantee payment will be made. In the cable TV context, payment rates improved by about 8%. Further, the technique is expected to work only if the debtor has sufficient funds to make payment without borrowing from another source. Still, here’s a simple way to improve collections when combined with other inducements and pressures.
     Improving payments helps the consumer as well as you, for they can maintain momentum climbing out of debt. Researchers at Northwestern University analyzed this phenomenon. They found that a good predictor of the consumer’s success was the number of credit accounts closed toward the start of a debt elimination program. The dollar balance of the credit accounts closed at the start was not a good predictor of success. Instead, the momentum of closing accounts signaled the difference.
     Psychologists talk of a “flow state” in which a person who makes a consumer decision then becomes more likely to make another similar decision and then yet another. Flow your consumers into good financial habits.

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Round Up Benefits for the Shopper 

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