By accepting credit cards, Austin-based tech company, ETS-Lindgren, solves a common AR challenge.
If you have ever used a cell phone, driven an electric vehicle or had an MRI, you may owe a small debt of gratitude to an 800-person company in Austin, Texas.
That company, ETS-Lindgren, designs and manufactures solutions that measure, shield and control the electromagnetic energy emitted by these and other devices. The company’s solutions — which include everything from large satellite test chambers used by aerospace companies to small current probes that measure radio frequency current in power cables — help ensure the products you rely on function as designed.
Given ETS-Lindgren’s wide-ranging products and services, any given sale can range from a few hundred dollars to $1 million or more. Regardless of the amount, the company extended the same net terms to all customers. That is, until about seven years ago.
That’s when ETS-Lindgren opened a Merchant Services account with Commerce Bank and began accepting advance payment by credit card.
“We are an innovative company, committed to our customers’ success. That commitment means we like to make it easy for our customers to pay us, and card payments are easy,” explains Jonathan Reed, accounts receivable manager for ETS-Lindgren, a subsidiary of ESCO Technologies, also a customer of Commerce Bank.
But there was another reason the company wished to accept more payments by card, especially payments for smaller orders. An examination of the company’s past due accounts found that more than 43% were for amounts under $3,000.
“It takes our five-person AR team the same amount of time to collect a past due $200 invoice as it does to collect a $20,000 invoice,” says Reed. “Our analysis showed we were spending 43% of our time collecting on invoices that, in terms of dollars, represented just 2% of our aging line.”
Improving AR efficiency.
With this information in hand, Reed and his AR team made a plan. Instead of universally extending 30-day net terms, they would seek to shift customers with orders under $3,000 to paying upfront with a credit card.
“Upfront card payments take a huge load off of my collection team’s back,” says Reed. “It lets us spend more time working with customers with higher-dollar accounts.”
The company’s customers seem content with the switch. While usage varies by month, ETS-Lindgren today receives anywhere from $250,00 to $1 million a month in card payments each month. Even a few customers with million-dollar invoices have chosen to pay by card, Reed says.
There is one caveat. “We only accept cards for advance payments,” explains Reed. “Because we don’t add a surcharge, customers who use a card lose their net terms. In other words, they can’t wait 30, 60 or 90 days and then pay by card.”
With Commerce Bank’s help, ETS-Lindgren is currently exploring ways to offer that option through the company’s ERP (enterprise resource planning) system. “For customers willing to pay a small surcharge, we want to be able to offer the net terms,” says Reed. “It’s a convenience for both them and us.”
The company’s decision to maintain their merchant services with Commerce has been a good one, Reed says. “Whether it is finding a good credit card processing solution or getting us information we need, Commerce is always trying to find efficiencies and be an asset. That’s what makes our partnership so good,” he says. “Commerce is one of the better banks I’ve dealt with over the past 30 years. It’s in the top three, if not the top one.”
“We have a personal connection,” Reed adds. “When I have a problem, our bankers make it their problem, and they aren’t happy till it is resolved. They understand what I’m saying and come up with an answer. They do what they say they’re going to do in a timely manner.”
“Positive things always happen when I reach out to Commerce,” Reed says.
“We have a personal connection. When I have a problem, our bankers make it their problem, and they aren’t happy till it is resolved.”
— Jonathan Reed
Accounts Receivable Manager | ETS-Lindgren
