So, you’ve read our last article Why Your Invoice Isn’t Getting Paid and determined that you share a B2B relationship with your customers (i.e. your customers are businesses, not consumers). Additionally, we discussed some of the main reasons for late payments from B2B customers and how they are often process-related. Here is a quick recap of the late payment reasons we highlighted:
- Rigid Payable System
- Multiple Approvals Required
- Different Data Requirements
- In-House Payable Terms
Why Do B2B Customers Pay Their Invoices Late?
The most important element to understand about late payments from B2B customers is that they often stem from issues related to the processes of their business. Understanding this will help you determine payment solutions that are both effective and realistic. It might also help you implement methods for preventing late payments from occurring in the future.
B2B Late Payment Solutions: What You Should Do
Send Prompt Invoices
The clock starts once your customer enters the invoice into their payment system. So, be as efficient as possible on your end. For example, don’t wait for a client to ask for your W-9, as this could delay your invoice payment for months. Rather, be proactive and send one to all of your business customers.
Identify Payment Terms in Advance
Recognize that businesses have their own payment procedures and schedules in place that are often strictly adhered to. No matter what payment terms you present them, they will most likely stick to their own. Understanding your client’s terms can alleviate frustration during the invoicing process.
Consider Payment Incentives
If you are considering offering payment incentives to your customers, be sure not to give away too much. Remember, you agreed on a price with this customer, completed the work successfully, and are now ready to be paid for that work. Only consider incorporating payment incentives into this process if it makes sense for your business. For example, if a business utilizes automated payment software, a small discount of 3-5% for on-time payments could get your invoice to the front of the payment line.
Get the Right Contact
Confirm all the necessary contact information with your client. Ideally, you can get the name of the individual to whom invoices are sent. With larger companies, however, confirming the information of “Accounts Payable” may be just as good.
Get Multiple Contacts
Understand any additional information needs in advance, so that your invoice is complete and meets the needs of your customer. This might include information like job number, purchase order number (PO number), service address, and more.
Identify Mail Preferences
Know your customer’s mail preferences. For example, some businesses may require paper invoices be sent instead of email, while other businesses may have in-house payables systems that require an electronic form.
B2B Late Payment Solutions: What You Should Avoid
Aggressive Payment Reminders
It’s important to remember that businesses stick to their devised payment schedules. Any delays that you experience shouldn’t be taken personally. With that said, an automated reminder when payment is 10-20 days past due is a gentle way of bringing attention to an invoice that may have gone unrecorded or is missing information.
Late fees aren’t worth the effort. Businesses tend to pay on their own terms. Any late fees you try to implement will more often than not just go unpaid. Moreover, trying to assess your customer with late fees will encourage them to look for a different service provider.
If you have B2B customers, consider utilizing the solutions mentioned above for late payment troubleshooting or to implement a proactive approach that prevents late payments all together. Understanding that late payments from B2B customers are process-related will help you determine the most efficient approach. In the next article of this series, we will cover late payment solutions for your B2C customers.
Utilizing recurring billing software can assist with your B2B customer invoicing. If you are interested in learning more about how recurring billing software can benefit your business, contact ReliaBills at 1.877.93BILLS (877.932.4557) or email@example.com.