New credit and collection benchmarks: Current delinquency rates

What are your company’s A/R delinquency rates? A full 15% of business-to-business receivables are currently past-due.

So says the new B2B Payments Innovation Readiness report, a collaboration between PYMNTS and American Express.

Nobody wants to carry old agings into a new year.

With a little more than a month to go in 2021, check out some compelling reasons to move quickly with a team effort to start the new year with a healthy cash position.

The case for fast follow-up

Companies have ZERO time to waste when contacting delinquent customers. Holding off can be seriously costly:

• Companies that wait an average of 45 days to follow up on overdue payments have 26% of their receivables overdue, while
• Firms that follow up within five days of payments becoming overdue have an 8.8% delinquency rate.

So your more proactive peers enjoy past-due rates at 40% below the average. That translates into a ton of money!

Your own credit and collections team likely understands the urgency and the bottom-line impact of being quick to act. (Though you can benchmark to see how your own department’s delinquency rate compares.)

But this info might just get some other groups critical to the collection process to become more involved, including:

• Sales. Need your salesforce to get more involved in your collections process? These numbers can help support why an all-hands-on-deck approach is critical.
• IT. Greater automation can have a substantial impact on the effectiveness of your collections. Share these new stats to get higher on the tech priority list.

A two-front focus for delinquency rates

Whether you enlist Sales, IT or simply go it alone with your existing finance staffers, you want to focus on two fronts:

1. How you prioritize collections. How strategically does your team handle this critical task? Consider embracing a more risk-based method over the traditional approach of how much is owed and how late it is.

The folks at Dun & Bradstreet advocate factoring in customer data such as business credit scores, trade payment history, and financial statements when determining how to prioritize collections.

2. How quickly you send payment reminders. Folks don’t necessarily have to be jumping on the phones. When speed is of the essence, a well-crafted email can help.

Just make sure the subject line contains the words Payment Reminder, the invoice number and the due date. Then either attach the invoice or send a link to your portal to eliminate further delays.