In the world of Business-to-Business commerce, receiving timely payment is often the lifeblood of a B2B operation. For the company providing the goods or service, the seller's or service provider’s payment terms are often defined in the purchase order and/or services contract.
If a business’ accounts receivable starts to drift beyond their scheduled terms, the organization can begin to feel the squeeze when trying to meet their own financial obligations. This may include challenges with:
- Making payroll on time
- Covering the rent or mortgage
- Ordering office supplies
- Manufacturing, Procuring, or Delivering new services
- Paying vendors
- And more…
With so much on the line, B2B companies may not survive if their customers don't pay on time.
Invoicing Customers: Business to Business
Most businesses have an Accounting Department or back-office that helps keep their company financially stable. Invoicing and following up on customer payments typically falls under their area of responsibility. When a customer falls into a past-due status, the accounting department with generally send a payment reminder and subsequent late notices to urge the customer to pay.
When payments begin to drift too far out, it is not uncommon for the originating sales representative to be brought back in to help reach out to the customer to try and resolve the delinquency in a friendly manner. The reason for the gentle urging is to maintain the status quo of the B2B relationship. Due to the longer sales cycle, the higher number of involved stakeholders, and the larger invoice amounts, the B2B relationship was a hard-fought win and should be considered during the collections process.
If payment is still not received, service is either suspended or terminated, and the continuity of the relationship is at stake.
Understanding why the customer is paying late is critical when determining the next course of action.
Why customers pay late (or not at all)
Typical payment terms range between Due upon Receipt, and go up to 15 days, 30 days, 60 days, or 90 days from the date of the invoice. Larger enterprise customers may have payment terms that extend to 120+ days, but this is less common. Customers have already agreed to these payment terms in the service contract or they were notified at the time of the sale. With that said, there are still a plethora of reasons why customers pay late.
- Too busy
- Out of the office
- Misplaced or mis-communicated invoicing
- Financial hardship
- Dispute over product or service
Why Consider B2B Collections Companies
When it comes to getting paid, B2B collections companies know that doing their research before contacting the customer is paramount. Reviewing purchase orders, sales contracts, previous billing attempts and customer correspondence will help reduce the friction and time it takes to resolve your outstanding invoices.
B2B Accounts Receivable and Collection Companies can help resolve unpaid invoices and protect your brand.
Professional B2B collection companies can help:
- Establish consistency in payment reminder communications
- Expedite payment of past-due customer invoices
- Identify root causes for missed payments
- Set precedence for future payments
- Protect your brand and maintain customer relationships
With consistent and diverse experience, a debt collection company that specializes in B2B accounts receivable and collections can go further in resolving unpaid debts.
Account volume: Quality over quantity
Many B2B companies may be hesitant to outsource their collections to a third party company. In many cases, these companies may have only a handful of past-due accounts. The assumption is that a collections company will only work with a high volume of accounts. This is simply not true. B2B collections companies are fully aware that businesses will not always have a high volume of B2B customer collection accounts to send each month. In fact, many of customer choose to place their receivables and bad debts on a quarterly basis.
According to the 2015 Atradius Payment Practices Barometer, B2B companies are finding some of their accounts are consistently late. Other findings include:
- The average payment term on B2B invoices in the U.S. is 20 days
- 94.7% of those surveyed reported late payments from customers in the previous year
- The average portion of receivables over 90 days past due is 12.2%
- Date Sales Outstanding (DSO) average is 30 days
- 20.3% of respondents consider cost containment one of the biggest challenges to profitability
Other statistics are indicative of a late payment trend on about one fifth of the value of B2B receivables. Whether your company has 1 delinquency or 100, our company is prepared to service and expedite payment(s) on your account.
When to hire a third party:
Recognizing a specific need for B2B collections and business relationships, BYL Collections spun off a sister company, Enterprise Recovery. Enterprise Recovery exclusively works with businesses attempting to collect from business clients. The same care and customer approach applies.
We recognize no one knows your business better than you do. We leave it to your discretion when to send past-due customers to collections. Our team can help make recommendations based on your industry, current aging, and customer relationships. Our approach is tailored to meet these needs.
It is common for companies to leverage third party billing and collections when:
- The customer has a pending sale or acquisition
- The customer relationship has been terminated
- Quarterly or Year-end financials are reviewed
Earlier stage collections may be resolved using an outreach program conducted on your company’s behalf, featuring your name and your brand. Later stage delinquencies may be better served operating under our bad debt collections company name.
Either way, we believe in the old adage that says: “You catch more flies with honey than you do with vinegar”.