Mastering Customer Payment Deadlines: 5 Key Strategies for Success

Imagine having zero working capital requirements (WCR)! Effective management of accounts receivable is vital for any business, but it’s even more crucial in certain industries. Intermediaries like marketplaces, tech solutions and agencies, as well as SaaS companies, view it as a strategic tool to foster customer and user loyalty.

Yet, despite legal or negotiated deadlines, many companies struggle to meet payment obligations to their suppliers on time. Sound familiar? Don’t worry, we’ve got you covered. Get ready to take action with our 5 essential steps to conquer customer payment deadlines and supercharge your cash flow.

Introduction: Theoretical and Actual Customer Payment Deadlines

Whether it’s B2B or B2C payment deadlines, getting paid instantly is the lifeblood of any business. Smooth cash flow from sales often determines a company’s ability to continue operations and settle its suppliers. To prevent unfair practices, lawmakers have implemented regulations in this area.

The Nitty-Gritty of Customer Payment Deadlines

In Europe, payment deadlines between businesses are legally limited. By default, payment is expected within 30 days after delivery or completion of services, as outlined by the Late Payment Directive. This deadline can be extended to 60 days. However, specific industries may have their own unique payment terms in accordance with relevant European regulations.

Late Payments: A Common Predicament

Companies must clearly state these payment deadlines on their invoices. The Late Payment Directive outlines penalties, including fines, administrative charges and fixed compensation for non-compliance. It even specifies the minimum interest rate for late payments. Yet, despite these measures, many companies still fall behind on their payment obligations.

1 – Mastering Payment Deadlines

Before diving into debt collection or working capital financing, it’s crucial to master customer payment deadlines:

1. Get acquainted with the law.
2. Scrutinise your negotiation skills when it comes to payment terms in your contracts.
3. Stay in the loop with industry practices to ensure your proposed deadline doesn’t lag behind your competitors’.
4. Encourage customers to pay promptly by offering discounts for instant or early payments.
5. Make sure your sales invoices pack a punch with penalty information.
6. Last but not least, keep a close eye on your company’s average days sales outstanding (DSO).

2 – Assessing Customer Risk Before Sealing the Deal

A potential game-changing client approaches your company, promising substantial revenue. But before diving headfirst into a new account, your finance and sales teams should dig deeper and assess any lurking risks. After all, mastering payment deadlines begins long before the ink hits the paper on a sale or contract.

To conquer this challenge, we’ve devised a winning strategy:

• To gauge their solvency.
• Demand guarantees or lock in payment conditions—like upfront deposits or prepayment based on a pro forma invoice—to safeguard your interests.
• Protect yourself against customer risks by arming yourself with credit insurance, shielding your bottom line with a predetermined coverage cap.
• Seize control of outstanding balances by seamlessly integrating data into your order management system, leaving no room for surprises.

3 – Turbocharging the Invoicing Process for Lightning-Fast Payments

Selling and fulfilling orders is a step in the right direction. But if you want to take it up a notch, instant invoicing is the key.

3.1 – Send the Invoice, Pronto

The longer you wait to send your customer an invoice after completing a service or delivering a product, the further you push back the sweet sound of cash hitting your account. By streamlining your administrative process, you’ll manage your customers’ actual payment deadlines.

3.2 – Embrace the Power of Digital and Electronic Invoicing

Gone are the days of manual paperwork. With a plethora of online invoicing SaaS applications at your fingertips, transforming quotes or fulfilled orders into invoices has never been easier. These cutting-edge solutions simplify digital invoicing and seamless transfer to clients, but also automate tedious accounting tasks.

The future is bright with electronic invoicing set to revolutionise the Procure to Pay game. It’s your ticket to streamlined invoice management and unparalleled control in the receiving process. Say hello to fewer disputes and a turbocharged average customer payment period.

4 – Keep a Close Eye on Your Receivables

Once the invoice is out with a set due date, it’s time to collect. To master customer payment deadlines like a pro, the company establishes a well-structured follow-up system.

Begin by implementing regular assessments of old balances to spot any overdue deadlines, especially those that have surpassed the grace period. Streamlining dispute management also avoids major bottlenecks caused by a single disagreement among multiple invoices.

Keep the momentum going with automated pre-reminders sent to clients before the due date. This friendly nudge helps pinpoint misplaced invoices. Embrace a systematic escalation procedure and get your sales team involved. When the going gets tough, take proactive steps to address your clients’ financial challenges.

Offering a tailored repayment plan keeps your business afloat and minimises financial risks during turbulent times. And don’t hesitate to tap into specialised collection services if friendly reminders fail to deliver payment.

5 – Empowering Your Cash Flow: Financing Customer Payment Delays

Don’t let extended customer payment deadlines hinder your cash flow. Take charge by exploring financing options for your working capital, with a special focus on customer accounts. This becomes even more critical if your business model hinges on timely payments to secure supplier relationships.

5.1 – Choosing Invoice Factoring or Discounting

This financing solution empowers you to transfer your company’s receivables to a factoring or discounting company or bank. Through this approach, you can quickly assign a portfolio of existing or future invoices from all clients or a specific category. Keep in mind, though, that while this option offers rapid cash injection, it comes with some limitations. Individual invoice management can be challenging, and flexibility is constrained.

5.2 – Unlock the Power of Embedded Invoice Financing With Aria

Discover a simple and accessible way to finance your invoices tailored to your specific needs. This is Aria’s expertise! With embedded finance, you can seamlessly integrate financial services directly into your platform. With just one click, freelancers and service providers can request lightning-fast payment for their invoices. As soon as we receive a request, we provide cash advances so your suppliers can be compensated.

This groundbreaking solution is based on assigning receivables from end clients who benefit from the contractor’s services. As a result, specialised SaaS platforms, digital service companies and B2B marketplaces can effortlessly meet supplier payment deadlines by financing customer accounts.

Business success depends on cash flow management. That includes prompt customer payments. But why stop there? Take it a step further by exploring financing your outstanding customer accounts. With this strategic move, you’ll experience a win-win situation: your cash flow stays strong and steady, while your valued service providers receive their payments on time or even ahead of schedule. Don’t miss out on this opportunity to optimise your financial operations!