Whatever the size of your business, you will no doubt already be aware that invoicing is key to your company’s success. After all, it’s how cash continues to flow into your organization. However, when everything doesn’t go according to plan, and payments are not received on time, life can be an uphill struggle. What do you do when a customer or client doesn’t make his or her payment on time? Keeping clients happy is important. But, the severe consequences nonpayment can have on your business demand that something is done. So, how do you handle the situation? And, is negative or positive reinforcement the best option? When it comes to eliciting payments on time, B2B payment providers believe both have a role to play for companies struggling to elicit payment of debts.
How Does Positive and Negative Reinforcement Differ?
Negative reinforcement refers to an aversive stimulus once a specific behavior has been exhibited. This increases the chance of that behavior being repeated in future because of a desire to avoid that negative consequence. While this sounds like a form of punishment, in fact, it should not be looked at in this way. The purpose of negative reinforcement is to increase a form of behavior while, in the case of punishment, the purpose is to decrease a behavior.
Positive reinforcement is the exact opposite and presents a reinforcing or motivating stimulus once the behavior to be desired has been exhibited to encourage the same behavior in the future.
While both sound very different, there are similarities between them, primarily in their main objectives, i.e. it increases the occurrences of the chosen behavior.
How Does This Relate to Payments?
One example of negative reinforcement in billing is to attach a late fee to the amount that remains overdue. Usually, this will be only a small amount, since having an enormous penalty could well dissuade the client from doing business with you in the future.
One example that shows positive reinforcement in billing is to give discounts to clients who pay their outstanding amounts early. Once more, it should only be a small amount, But, it could well persuade a client to do business with you in future.
So, Which Works Best?
Both strategies have their uses, and B2B payment providers tend to believe that both positive and negative reinforcement have a part to play in sparking that initial change in habits.
When clients receive a late fee, they often make payments at the correct time when their next bill arrives. However, over time, this positive effect may wear off. This is because, in the case of some clients, an additional $50 per month is a drop in the ocean; Others will simply move to one of the company’s competitors to avoid the late fee.
This means that, for long-term success, positive reinforcement remains the best option. It has been shown that even a small reward can change the habits of clients, and even a small incentive to make payments on time encourages early payments in the future.
This has led to B2B payment providers believing that while it is negative reinforcement that changes the late payment habit in the first place, it is positive reinforcement that keeps the habit alive. Over the long term, positive reinforcement also helps to develop trust between businesses and build stronger relationships. Of course, there is more to developing strong B2B working relationships than simply positive reinforcement. By offering convenient forms of payment, such as online portals and IVR-automated telephone systems for making payments, companies could well avoid the problem of nonpayment in the first place.