Dive Brief:
- Eighty-six percent of businesses struggle with getting on-time customer payments in up to 30% of their monthly invoiced sales, according to survey findings released Thursday by credit monitoring and risk management firm Creditsafe.
- It’s a problem that can seriously drain monthly cash flows, especially among small and medium-sized businesses, according to a report on the findings.
- “While it’s normal to see about 5% of your monthly invoiced sales coming in late, it’s another thing to see upwards of 30% of monthly invoiced sales being overdue on a regular basis,” the report said.
Dive Insight:
Late customer payments can disrupt business operations, cause cash flow issues and even make it challenging for a company to stay open, according to Clover Network, a company that provides point-of-sale systems for small and medium-sized businesses.
Over 80% of businesses typically chase a customer between one and four times just to get a single overdue invoice paid, according to Creditsafe’s study.
Despite the frequency of the problem, 61% of respondents said they don’t always analyze a potential customer’s historical trade payments and late payment trends before signing a contract with them, the research found.
“Our study’s findings highlight the need to educate — or re-educate — finance teams on how they can properly identify red flags when assessing the financial health of their customers,” Steve Carpenter, chief operating officer for Creditsafe’s North America division, said in a press release.
The problem can be minimized through steps such as setting up automated alerts for overdue invoices, charging late payment interest fees and re-negotiating payment terms with delinquent customers.
CreditSafe polled over 200 U.S. finance and accounting professionals in January. The respondents represented small, medium and large companies across multiple industries, including retail and wholesale, manufacturing, construction and telecommunications.
