Through its annual Financial Management Priorities survey, APQC found that late customer payments are one of the most common cash flow management challenges facing organizations today. Delays in customer payments can contribute to a liquidity crunch that prevents an organization from taking advantage of key business opportunities or even simply keeping the lights on.
This is why receiving on-time payments from customers is crucial for a company’s financial well-being.
Here are three effective strategies that leading organizations tend to use to get faster payments from customers:
- Connect with Customers- It seems trivial but ensuring the accuracy of your customer master data and working to help customers understand the payment due dates are two of the best ways to ensure your invoice gets paid as quickly as possible. To keep the invoice on their radar, provide customers with at least an annual opportunity to update their contact information and send system-generated reminders that their due date is approaching (or has already passed).
- Encourage Electronic Payment- Providing easy payment options for customers—and making those options visible—can also help to drive down your cycle time. While some organizations in 2024 are still paying their invoices with a paper check, many customers would be willing and would even prefer to pay electronically. If you provide electronic payment options for customers, review one of your most recent invoices to ensure these options are visible and accessible—not buried at the back of the invoice in tiny print.
- Invest in Your Collections Efforts- The term ‘collections’ is often associated with sternly worded letters and damaged credit relationships, but the work of collections is not always punitive. Developing the capability to follow up proactively with late-paying customers helps you to get paid faster. In many cases, your customer may also appreciate knowing you’re still waiting. Especially in a business-to-business context, your customers may think they have already paid when, in fact (whether due to fraud or problems with AP), that payment has fallen through the cracks.
Explore the average time an organization takes to receive a customer payment in APQC’s Getting Customer Payments More Quickly.