accounts receivables

Anticipate late payment from your customers

Regardless of the size of your business, how you manage your accounts receivable is important, as these accounts play a vital role in your liquidity. They lead to payment for your goods or services. But in reality, sending an invoice doesn’t always mean that the money will come in. It sometimes takes more time or further action. Is this an issue for you?

Late payment: the norm for accounts receivable

Oftentimes companies think that all it takes to get paid is to send an invoice. In reality, though, both you and they know that it is not always the case. In a survey by Atradius, 94% of the North American companies polled reported having experienced late payment of invoices from their B2B customers. The same held true in Europe, where the rate of invoices not being paid by the due date was 92%.

That means that approximately 4 out of 10 invoices issued by a company will not be paid on time. In some cases, it takes up to 3 months to get paid in full. This fairly regular behaviour may be a problem for your business. You rely on those payments for liquidity purposes, in order to keep your business going.

Long delays hinder your bill collection

Even when payment was 90 days overdue, it was still noted that a significant portion of the invoices went unpaid: on average, 12% in North America and 7% in Europe. You might think that customers would pay on time if the payment period were longer. But the reverse is true. The more time goes on, the less likely the customer will pay in full.

After three months, a company has a less than 74% chance of collecting the money owed. After six months, the likelihood drops to 30%. And after one year, there is only a 10% probability of getting paid.*

These unpaid invoices turn into bad debt. It happens more often than you think. We’re talking about 2.2% of accounts receivable in North American companies, and 1.2% in European companies. Imagine! A company issuing $500,000 worth of invoices in a year would suffer $11,000 in losses. Do the math for your situation—you’ll see how significant the impact can be!

Reasons for late payment in your accounts receivable

Why do your customers pay late or fail to pay at all?

Problems with liquidity and complex banking procedures are some of the obstacles to timely payment. But you don’t really have control over those things.

On the other hand, you can do something to address another reason: customers don’t pay right away because they don’t agree with the invoice. They dispute it, believing it contains errors: wrong quantity, incorrect price, missing purchase order number, problems with the quality of the product/service, or non-delivery.

Perhaps your customer didn’t get the invoice because of an incorrect address, or they simply lost it. According to IDC, a market research firm, large organizations lose one document every 12 seconds! It’s something you can take action on!

Anticipate disputes with automation

It is highly likely that the problem occurred before billing, because the quality of your invoices depends on the quality of the transactional documents, such as the proof of delivery or the purchase order. Without correct and valid documents, payment is not possible.

A good way to prevent such situations is to automate your processes. Managing invoices digitally makes them easier to find. If your customer has lost an invoice, you can easily send it again by email. All documents are stored in the system in the same location. If a customer disputes the quantity delivered, for example, your employees have direct access to the information for verification. Sometimes the system can draw your attention as soon as an item is missing or problematic, even before billing. So your staff can quickly contact the customer to resolve the issue. That translates into savings in both time and efficiency, and consequently improves your liquidity.

At Objectif Lune, our strength lies in anticipating challenges to invoices. We do it by offering systems that help to prevent disputes and to quickly and easily find a solution to them. And none of this involves changing your existing systems!

Do you want to eliminate invoice errors and disputes? We have the solution you need, and it’s tailored to your needs