Waiting…and Waiting…to be Paid

One thing all businesses have in common is delayed payments. According to Dun & Bradstreet, 21 of 209 industry segments reported that more than 10% of their aging dollars were 91+ days past due in Q1 2023. Of those 21, 15 were experiencing excessively late payments (see Figure 1).

Figure 1: Top 15 Industries Getting Paid Severely Late in Q1 2023

Source: Dun & Bradstreet, “Accounts Receivable and Days Sales Outstanding Industry Report,” June 20, 2023

Of the 15 industries reviewed, nonresidential construction had the highest percentage of severely late payments (26.8%). However, all industries were experiencing late payments of varying lengths.

How to get paid faster

Effectively managing cash flow is critical to business survival. Adopting a few best practices will ensure you’re getting paid in a timely manner.

1. Analyze and update payment strategies.
   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 accounts receivable strategies across their customer base.1
   
   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.


2. 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.


3. Establish expectations with customers.
   Based on your organization’s payment strategies, set guidelines for everything from account setup, 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.


4. Automate AR processing.
   Eliminating manual processing reduces errors and waste, while ensuring that invoices and payments flow smoothly. Businesses with a moderate degree of automation achieve DSOs of 55 days, which is 30% lower than those still using manual systems.2 Companies with automation also see an average reduction of 11% in follow-up (on late payments) delays.3 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.


5. 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.


6. Prioritize collections.
   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 miss payments. 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? If not, complete a short form and a Synovus Treasury & Payment Solutions Consultant will contact you with more details on how we can help you accelerate accounts receivable. You can also stop by one of our local branches.