How to limit the risk of late payment and unpaid payments?

The customer position is the uncashed turnover. In France it represents about 40% of the assets of a company or 20% of its annual turnover (about 2 months). One French company in four encounters economic difficulties due to late payment. That is why it is important to understand this issue well in order to adopt the best practices according to the different phases: prevention, pre-contentious, amicable recovery or judicial recovery.

Causes of customer-related late payment

Late payment is a statement of fact. It has a financial impact on businesses. Among the reasons for unpaid customer are the following reasons:

• Oblivion
• The processes of validation of long and complex invoices (common within major groups or administrations…)
• Disputes or disagreements about the nature, purpose or volume of the goods sold or the services performed. More than 70% of late payments have a cause related to a dispute. Example: quality of invoices, missing supporting documents, non-compliant goods, etc.
  • Bad faith
  • Financial difficulty or cash flow problem
• ….

Late payment: causes related to the supplier company

On the part of the supplier company, the reasons for late payment are also multiple:

• Incorrect invoices and delivery error
• Lack of time or resources dedicated to monitoring and claiming payments
• Lack of centralized information and lack of visibility on unpaid invoices
• Fear of claiming in order to preserve the relationship with customers
• Lack of awareness of formal and litigation procedures for handling unpaid invoices

The processes to be put in place in a healthy cash culture

The late payment of an invoice is a frequently encountered challenge. To best manage this risk while preserving the customer relationship, business leaders and decision-makers need to put in place rigorous internal processes.