B2B late payments can be a potential major pain point for your company, leading to late fees, missed opportunities for early payment discounts, duplicate payments when a vendor sends a second invoice for the same bill and other problems.
Research shows a notable number of A/P pros are struggling with B2B late payments. A recent report from Deloitte found 30% of mid-size businesses are having issues with long payment processing cycles, taking an average of 30 days to complete a payment.
Also, a survey of 500 Finance pros by AvidXchange found that less than two-thirds (59%) of organizations “almost always” pay their bills on time.
The reasons for B2B late payments are many, including:
- Purchase orders that are filled out or matched incorrectly
- Outdated supplier information
- Lack of visibility of invoice and payment details, such as due date, amount and status
- Post office delivery delays
- Inefficient invoice approval processes, and
- Too much reliance on paper invoices (which can get lost) and paper checks (which can get stolen).
Reducing B2B late payments
To reduce B2B late payments and improve cash flow and supplier relationships:
Be transparent with your suppliers. Ensure that your suppliers are aware of your approval processes and timelines, and work with them if necessary to adjust due dates to ensure they get paid on time. Ask if they offer discounts on early payments or digital payments. It’s also helpful to keep them in the loop on payment statuses.
Start using more digital payments and less paper checks. Ask your suppliers if they’re open to accepting digital payments, such as virtual credit cards, instead of checks. Digital payments are faster to execute, speeding up delivery time, and save money on the cost of paper and postage. (Goldman Sachs estimates that these supplies alone put the cost per check at $1.55.)
Automate your accounts payable process. A/P automation software can significantly reduce the number of steps in the invoice and payment process – including the frequent emails, texts and phone calls to get invoices approved. You can set up custom workflows to automatically route invoices and payments for approvals, and send reminders to ensure deadlines don’t get missed. If someone is on vacation, you can automatically reroute approvals to keep invoices moving. Certain A/P automation tools include a portal where suppliers can check their payment status at any time. Some automation providers even provide customer service representatives to field payment status calls for you.