5 Reasons Customers Aren't Paying On Time
Late payments can create significant problems for businesses of all sizes. Not only do they impact cash flow, but they can also affect a company's ability to pay suppliers and employees on time. However, it isn’t always the case that your client is having Cash Flow Problems. There are several other reasons that can lead to this. And, the good news is that these reasons can be resolved easily.
In this blog, we’ll discuss the top 5 reasons why customers aren’t paying you on time and how to resolve them.
Why Customers Delay Payment
- Missing invoices: One of the reasons for missing invoices is due to incorrect email addresses. However, it's more common for invoices to be sent to the wrong person or department. To ensure timely payments, it's important to know where customers prefer to receive invoices and be aware of their approval procedures. If customers have a specific accounts payable email address, use it. Additionally, if they require multiple people to be copied on the invoice, make sure to do so.
- Missing or incorrect information: The accounts payable team is often overwhelmed with their workload, and they may not prioritize tracking down or fixing billing errors. For example, if an invoice is missing a purchase order number or if the order information doesn't match the customer's records, the invoice may be put aside until someone has the time to contact the supplier or the supplier reaches out about payment. However, using centralized data access and AP automation can prevent these issues by eliminating the need for duplicate data entry. This enhances the accuracy of data and ensures that invoices include all the necessary information before they are sent.
- Billing disputes: Inaccurate pricing or billing for products that were not shipped can lead to frustration for customers. However, billing errors can also have a negative impact on a company's cash flow in several ways. Typically, customers will delay payment until the errors are resolved, which affects short-term cash inflows. Additionally, frequent billing disputes may cause customers to switch to competitors, which hurts long-term cash flow.
One way to avoid billing errors is to implement automated invoicing, which can ensure that the correct pricing is applied to every order and that customers are charged only for the items actually shipped. In cases where companies bill customers incrementally, it can be challenging to keep track of billing schedules, especially if records are in spreadsheets. Invoicing customers at the wrong time, such as before the completion of an agreed-upon milestone, can result in disputes. To simplify the process and ensure accurate billing, an accounting solution with automated billing schedules can be useful for AR staff.
- Poor formatting: An invoice that is poorly formatted or lacks necessary information is likely to be rejected. In most of the cases, billing systems provide a limited number of templates that are difficult to customize. It leads to a one-size-fits-all approach to invoices. This can cause problems if customers require additional information that is not included in the standard template, such as license numbers or vendor IDs.
Invoice requirements can vary based on the industry or the products and services provided. For example, a construction company may need to include an itemized list of materials used and hours worked, while a manufacturer offering promotional discounts may want to add the terms and duration of the promotion. And, a professional service organization has a completely different set of invoice structures. Thus, inflexible templates may require hiring a consultant to create a custom invoice format.
Poor formatting can also make a seller appear unprofessional, potentially causing the invoice to be rejected as fraudulent. To avoid this issue, it is recommended to look for a solution that offers flexible standard templates and easy-to-use tools for creating custom invoices.
- Accounts payable process: When it comes to receiving payment, a company's internal accounts payable (AP) processes can have an impact. For example, if a customer's finance department only issues checks once a month, it could take a couple of weeks after the invoice's due date for payment to be made. It may not be feasible to change the customer's payment cycle to suit your needs. However, what you can do is offer them alternative payment options like credit card, wire transfer, or ACH transfer. It could speed up the process. Customers may find these options more convenient, particularly if they frequently make purchases or have recurring charges like a subscription fee.
Improve On-Time Payment with NetSuite
Issues like errors, manual processes, formatting issues and limited payment options can be addressed by NetSuite. Here is how:
- Accounts Receivable: Dashboards in NetSuite can be tailored to specific roles and can be customized with prompts and shortcuts to frequently used actions and reports. NetSuite's dashboard format presents key information and tasks in a clear and concise manner, enabling finance teams to quickly identify pertinent information and activities, thereby increasing collections and reducing days sales outstanding (DSO).
- Customer Records: NetSuite helps in maintaining the accuracy of customer information. With NetSuite, you can easily store customer data including contacts, transaction history, items purchased, open invoices, communications history and more, securely in the cloud. Furthermore, NetSuite's role based access and privileges ensure that only authorized users can access customers' accounts and modify records.
- Automated Invoicing: To streamline billing processes, NetSuite automatically converts sales orders to invoices. Furthermore, you can easily customize invoice templates to cater your unique billing requirements and send them through various channels, including mail, email, fax or electronically. Calculate taxes such as VAT and sales tax automatically. Transactions are automatically posted to the general ledger, which saves time, reduces the risk of errors associated with manual data entry, and ensures that accounts receivable data is current.
- Payment Management: NetSuite provides comprehensive support for credit cards and other non-check options through integration with payment gateways and an extensive network of partners.