B2B Late Payments Improve with AR Invoicing

Late payments for small-to-medium-sized B2B companies can be detrimental to an organization’s health. Business owners are continually looking for ways to improve their collections practices and secure the cash they are owed without negatively impacting their buyer-supplier relationship.

But better collections are just one piece of the cash flow puzzle. To improve on late payments, business owners should begin with focusing on the invoice itself.

Bottom Line Affected by Manual AR Practices

When businesses rely on paper invoicing and manual accounting practices, they are setting themselves up for longer days sales outstanding (DSO) timeframes. This approach puts companies behind the eight ball. Businesses receive payments later which will impact their bottom line due to the high cost associated with manual accounts receivables (AR) practices.

For each invoice generated, businesses take on the cost of paper, ink, manual labor, postage, processing, and other hidden costs. According to PYMNTS.com, many business owners don’t realize the built-in costs associated with billing and invoicing.

Offer a Choice of Payment

Unique to the B2B industry is the fact that services or goods are provided before the payment is made, opening the opportunity for an end customer to take as long as they would like to settle the bill – even if that bill arrives faster.

Automating the invoice is just the first step to improving this process and lowering costs. Automation jumpstarts the process of getting paid and can significantly improve the invoice to cash cycle. But there are other strategies that businesses should deploy to encourage payees to settle invoices faster.

One of the most effective approaches is to offer a choice of payment method. There is not one single payment method that will support faster invoice settlement. Rather, it’s the choice itself that encourages businesses to pay faster, whether it be through card, ACH or ApplePay.

Offering payment methods that are convenient to the payee gives them the ability to interact with your business in a time and method that is best for them. If the payee needs to make a payment after traditional business hours and your company only accepts payment from 9 am – 5 pm, it will cause delays in the cash flow cycle.

Managing Late Payments

Late payments have always been a hurdle for businesses. However, there are several strategies that B2B companies can employ to tackle this problem. Establishing clear guidelines with your payees is key.

To reduce the amount of late payments you receive, set clear due dates, send reminders, and implement late fees. When a customer fails to pay on time, consider offering them a payment plan. Performing these actions will help your business reduce the amount of debt that needs to be written off.

A payment reminder is a simple way to inform customers that their payment is expected soon. Develop a standardized email template to send to customers one week to a few days before an upcoming payment is due. For larger invoices, consider giving customers a reminder call. It helps establish a rapport and increases the chances that the bill will be paid on time in the future.

Getting paid faster is essential for all B2B businesses. Implementing these simple strategies can make your business more efficient and profitable.

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