More than a year into the pandemic, aided by widespread vaccine availability and various government programs, the U.S. is well on the way to economic recovery. Some companies are doing better than others. However, the one challenge all businesses are experiencing is payment delays.
According to Dun & Bradstreet and the Credit Research Foundation, 30 of 230 industry segments reported that 10% of aging dollars were more than 90 days past due in Q1 2021. Of those 30, 15 were experiencing excessively late payments (see Figure 1). The printing and publishing industry had the highest percentage of 90-day past due payments (58%).1
Figure 1: Top 15 Industries Getting Paid Severely Late in Q1 2021
% Paying Current
Up to 30 Days Late
30-60 Days Late
60-90 Days Late
91+ Days Late
Construction – General Contractors and Operative Builders
Passenger Car Rental
Retail Home and Auto Supplies
Wholesale Packaged Frozen Goods
Automotive Dealers and Gasoline Service Stations
Wholesale Medical and Hospital Equipment
Oil and Gas Extraction
Manufacturing – Environmental Controls
Manufacturing – Hoists/Cranes/Monorails
Manufacturing – Sheet Metalwork
Manufacturing – Signs/Advertising/Specialties
Source: Dun & Bradstreet, “Accounts Receivable Aging Report,” March 11, 2021
William F. Balduino, president and COO of the Credit Research Foundation, recommends that credit risk management teams perform a full portfolio analysis to assess and implement appropriate receivables strategies across their customer base.2
Terms that work for one customer might not be right for another. Do some customers pay early? Are others always late? Be strategic in applying terms and discounts based on volume and value. To decide where your team should focus, place all customers into one of four quadrants, with those who pay early versus those who pay late on one axis and strategic customers vs. non-strategic customers on the opposite axis.
Ensure employees understand and follow payment processes.
Rigorously train employees to be sure they understand the company’s overall payment goals, procedures, and tools. Sales representatives also need to be familiar with payment policies to ensure they are accurately communicated to customers when they make purchases.
Establish expectations with customers.
Based on your organization’s payment strategies, set guidelines for everything from account set up, to billing terms to payment plans. But don’t stop there – be sure clients know what to expect upfront and discuss what you should expect in return. If possible, assign dedicated staff to work with customers when they have questions or concerns. Sales representatives may also be helpful in establishing positive customer relationships.
Automate AR processing.
Doing away with manual processing eliminates errors and waste, while ensuring that invoices and payments flow smoothly. Businesses with a moderate degree of automation achieve DSOs of 40 days, which is 23% lower than those still using manual systems.3 Companies with automation also see an average reduction of 25% in follow-up (on late payments) delays.4 An integrated dashboard also offers insight into the receivables workstream.
Also consider using robotic process automation bots, application programming interfaces,
artificial intelligence and/or machine learning. Many banks and fintechs embed these in
their receivable solutions.
Make it simple for customers to pay.
Offer your customer multiple means to pay. You’ll want to capture all types of payments, from both paper and electronic sources, and be able to aggregate them regardless of location, type, or channel. This reduces exceptions, eliminates unnecessary deductions, cuts labor costs, and better manages payment relationships.
Determining how your company will manage collections should be included in the initial payment strategy. Develop a plan, including timelines, payment options and follow-up tactics, and stick to it. Consider hiring collection specialists who focus only on working past due accounts.
Most customers don’t mean to forgo payment. Be willing to work with them if they’ve experienced hardships or other unforeseen challenges. Try to negotiate a manageable payment plan. These actions may increase the likelihood of payment.
Do you have a strategy for timely customer payments? Contact Synovus Treasury and Payment Solutions, your Treasury Consultant, or Relationship Manager to see how we can help you accelerate receivables.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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