Customers Paying Slower, Study Shows: 5 Ways to Expedite Payment

Customers are paying slower.

Sure, your payment is still coming (fortunately), but the slower payments might leave you stretching working capital and tightening liquidity.

Paying Slower than Just Months Ago

More than two-thirds of finance professionals say their customers are paying slower than they were six months ago, according to research from Billtrust.

The slower pay has finance pros reacting:

• 48% have already shifted to more conservative cash management, essentially building reserves and tightening payment terms
• 43% have either canceled or delayed a major initiative due to this economic uncertainty, and
• About 70% have hit the brakes on growth or tried to (28% of them said they were overridden).

“This year, actions like reserve-building, tighter payment terms, and reduced discretionary spending appear more entrenched, suggesting the defensive mindset has become the norm rather than a temporary response,” the researchers noted.

Strategies to Speed Up Payments

While those strategies will help right the ship, finance pros might want to work at receiving payments early and avoiding late payments or going to collections.

Here are five strategies to ensure on-time payments.

1. Offer More Flexible Payment Options

Some customers are waiting longer to pay because they face temporary cash flow challenges. If you provide more flexible payment plans or alternative financing options, you will probably be able to get more timely payments while maintaining positive customer relationships.

Many organizations find that digital payment portals with self-service options can also streamline the process and encourage on-time payments.

2. Leverage Data Analytics

Take a closer look at your data analytics for valuable insights into payment trends to stay ahead of delayed payments.

Finance pros will want to analyze historical payment behaviors to identify accounts that are often on the cusp of late payments. From there, you can beef up the other strategies to get on-time or even early payments. Predictive analytics can also help prioritize accounts that need extra attention, improving efficiency and effectiveness.

3. Regularly Check Credit Policies

In any evolving economic landscape, you want to review and update your credit policies regularly.

Organizations that frequently assess risk tolerance and strategies are more likely to remain competitive while minimizing late payments. When you establish clear, consistent policies that align with current business conditions, you can help maintain financial stability.

But there’s a second essential step to this …

4. Strengthen Customer Communication

You want to maintain open and proactive communication with customers so they understand your payment and credit policies, especially as they evolve.

Make sure your system is set up to send early reminders before due dates, provide clear invoices, and ensure customers understand payment expectations. Proactive communication reduces the risk of delays.

A strong relationship with customers can also encourage goodwill and make negotiations easier if issues arise.

5. Emphasize Your Pay Discounts

You likely have early pay discounts: 82% of finance pros said they do this to reduce days sales outstanding (DSO), according to the Growth Corporates Working Capital Index. Two-thirds accept card payments to reduce DSO. About 20% of the finance pros also reduce terms.

They’re all good strategies, but the critical point is again: communication. Work with your sales team to thoroughly communicate discounts and special terms to customers, especially when they evolve.