93.8 per cent of businesses experience late payments

Late payment of outstanding invoices affects most businesses. Invoices not paid within the stipulated pay-by date put pressure on a company’s cash flow and, in extreme cases, can cause a business to become insolvent. Customers can use any number of excuses for continued non-payment, but there are ways for companies to counter these.

Recent Atradius research has shown 93.8 per cent of surveyed Australian businesses have experienced late payments over the past year. Survey respondents said that the risk of payment delay and payment default from business-to-business (B2B) customers has increased over the past six months. 18 per cent of the total value of Australian respondents’ B2B invoices remained unpaid 90 days or more past the due date[1].

Mark Hoppe, managing director, ANZ, Atradius, said, “In Australia, an average of 56.1 per cent of business-to-business receivable payments were overdue, with 2 per cent uncollectable.[2] This might not seem like much at first glance, but it’s a substantial amount, given that the total trade credit owed by Australian business has been estimated by the Reserve Bank of Australia at more than AU$80 billion.[3]

“Additionally, two in five businesses surveyed in the 2015 Atradius Payment Practices Barometer study said late payments by domestic B2B customers were mainly attributable to liquidity issues.”[4]

“Maintaining cash flow can be a real challenge when customers don’t pay their invoices on time. Not all reasons given for non-payment are genuine. If businesses can differentiate genuine barriers to payment and negotiate the non-genuine claims, they will have a better chance of ensuring payment and maintaining cash flow.”

Atradius has identified four of the most common excuses for non-payment of invoices and advises the best ways to deal with them:

1. The person who approves payments is away

 

If the customer says that the director, for example, is on holiday, so can’t approve the payment, find out what provision has been made to approve salary payments and pay utility bills during the director’s absence.

 

2. We’ve lost/never received your invoice – can you send a copy?

 

Find out if this is the only reason for late payment and offer to email over a copy immediately. If the customer doesn’t agree to pay within a couple of days, they are, in effect, admitting that this is a delaying tactic.

 

3. That account has been paid?

Ask for a copy of the remittance to be email to you urgently and you will soon find out if its been paid or not. If remittance is provided double check your bank account details are correct as debtors have been known to deliberately enter incorrect details to buy themselves more time. 

 

4. The computer is down

 

Ask how often these problems occur and how long faults usually last. If this is a genuine problem, they ought to be willing to make some alternative arrangement for payment (credit card, BPAY, cash deposit).

 

5. We are waiting for payment from a large customer

 

Ask the name and the address of the debtor and when they expect payment. The debtor should be able to establish some form of credit with their bank on the security of this debt. So, businesses should suggest they do this and find out how quickly they can arrange it.

 

Mark Hoppe said, “Don’t be sheepish when following up unpaid invoices. There’s no need to be rude, but it’s important to be firm. Remember, you have upheld your end of the deal, the customer has not, and so is in the wrong. Put pressure on the person you are dealing with by stressing how important your account is to them.”