The trouble that every business model faces today is when a customer is really interested in making an immediate purchase but then realizes that they don’t have the financial means to immediately make the purchase. This can be frustrating for the customer, but it should also frustrate you as a business owner—you just missed out on a sale! This scenario is common across industries, and it’s no different if you are involved in field service.
Managing expenses is a daunting task in the field service industry. With first-time fix rates and monthly payments, you need to stay on top of cash flow and keep an eye on your bills and other expenses that may come your way.
Offering financial services in the form of consumer financing provides individuals with immediate access to the money they need for various purchases. While the term consumer financing may sound unfamiliar at first, this system is based on the same principles and values traditionally used in banking and other lending services.
The pace of innovation has been growing rapidly over the past few years; this also holds true with respect to financial technology and field service management.
It is a win-win situation for both the business and the customer. Since the company has a solution that will quickly solve the customer’s problem without wasting additional time or forcing a compromise on quality. Any business owner familiar with consumer financing will tell you how beneficial it has been for them as well as their clients—leading to a positive customer experience.
With consumer financing, customers can access the goods and services they need without compromising on quality. Any business using consumer financing understands how advantageous it can be, both for their company and clients. This method of funding offers a wide range of opportunities typically restricted by other lengthy or expensive options.
What is the importance of consumer financing?
Consumer financing has caught the attention of the National Commission on Consumer Finance (NCCF). This commission understood the importance of consumer financing, analyzed cost factors, and even established an Act in 1968 called the Consumer Credit Protection Act.
The commission studied the intricacies of interest rates to identify and optimize opportunities and maximize the benefit for both consumers and financial institutions. The focus was predominantly on consumer finance companies that provided loans to small business consumers. The commission also realized that the break-even interest rates that consumer companies offered for credit were high on small loan amounts due to high fixed operating costs.
As the loan size grew, the break-even rates dropped sharply before leveling off; this was due to more significant operating costs spread across more considerable loan sums. This made consumer financing companies stay in business only with substantial loan amounts; this limits their risk acceptance to large companies.
How has consumer financing changed in recent times since the inception of NCFF?
The National Commission on Consumer Finance (NCCF) has put in place consumer finance regulations that have influenced the markets significantly, and there have been quite a few changes since the NCFF’s inception. With the advance of communication technology, financial innovation has also notably altered the consumer credit market.
New technology has helped streamline account acquisition with additional channels, and automation tools help process and evaluate applicants much faster. Credit bureau reports for applicants and their credit scores are easily available to financial institutions to verify their applicant’s economic history.
Most banks now provide an alternative to closed-end installment loans; they offer an innovative way of accessing short-term, small-amount loans to suit individual needs.
The five benefits of offering consumer financing options
1. Increase revenue with more sales
Customers are often forced to choose between affordability and convenience. Especially, when they must pay a large amount of money upfront while making their purchase. You will be able to increase your revenue by offering customers the opportunity to finance their purchases over time. Providing this option could make the difference between making a sale and having your customer walk away.
2. Customer satisfaction is the key to success
Offering a financing option will give your customers the flexibility to work within a budget they are comfortable with. It will also allow them the benefit of opting for a larger purchase, which may help reassure them that they are not compromising on quality and are making the right investment at the right price point.
3. Create and retain a loyal customer base
When you offer customer service that adds value and benefits your customers, they are more likely to stay loyal to you. Once your customers have made a purchase using the financing option you provided, they will appreciate the flexibility that comes with it. Customers already familiar with the option to finance are more likely to make use of it again for any additional services they might need in the future.
4. Maintain steady cash flow management
While providing financing options will benefit your customers and increase flexibility by allowing them to pay overtime, it also benefits you. Customer financing helps to make your cash flow more predictable. Knowing how much income you can expect in a given month makes it much easier to avoid debt.
If you expect that a given month or every quarter is likely to be lean, then it can help in your financial planning and decision-making. Maybe this is not the month to expand your workforce. Conversely, if you have an unexpectedly good quarter, you are in a better position than you anticipated; you can sock away the surplus for when you need it most or choose to upgrade your operations.
5. Enhance the profitability of your business
To ensure success, businesses must always be on the lookout for potential revenue opportunities. Consumer financing offers your customers the flexibility of paying over time instead of being burdened by a lump sum transaction. Customers who take advantage of financing don’t have to feel anxious about their ability to pay—feeling in control is important, and provides customers with the confidence they need, not only to make the current purchase but also to return to you in the future as a loyal customer.
Achieving a win-win in any business situation is by definition, beneficial to both parties. When you create a positive experience for your customers, it increases the likelihood of future collaborations—and future collaborations are the pathway to increasing your profits.
With businesses constantly evolving what services they offer and how they allow customers to pay for them, offering an option to finance seems like an obvious path to increased revenue. With consumer financing, field service business owners can ensure their products and services are attainable to a wide range of customers.
Customer satisfaction will be enhanced not only by your product itself but also because of the flexibility of payment options you provide through Consumer Financing. When a customer is satisfied with the service offered by a company, they are more likely to become loyal customers who will report favorably on your company to their friends and acquaintances. Word-of-mouth reviews are powerful and can’t be bought.
Providing financing options improves cash flow management by providing your company with predictable income while increasing the number of people who can easily access your products and services. By allowing for broader access, you are paving the way for increased revenue over time.
Field service businesses can take their operations to the next level by integrating with Field Service Management Software like Zuper. Zuper integrates with existing Consumer Financing software, like Wisetack, to help streamline your business. Learn more about the Zuper and Wisetack integration here.