There are plenty of things in life that you have to take one day at a time, but late payments might not seem like one of them.
Indeed, in the world of credit control, it’s often convenient to view payments not as an ongoing period of time, but in terms of instants – the instant the invoice is issued, the instant the deadline is passed, and the instant you receive payment (hopefully the ‘payment’ instant comes before the ‘deadline’ instant, but that is not always the case).
By way of contrast, however, late payments are much more about the continual passage of time – it affects how aggressive your debt recovery strategy should be, and how much interest you can add on to the invoice amount.
New figures from Experian show late payments in those terms, and reveal that, in 2012, the typical overdue invoice was settled one day faster than in the previous year.
The national average for 2012 as a whole was 24.66 days beyond agreed terms, down from 25.70 days in 2011; but while long-term improvement is worth celebrating, the end of 2012 brought with it a short-term glitch.
During the fourth quarter, late payments returned almost to their 2011 level, with a national average of 25.63 days beyond terms, with big businesses – those with more than 500 employees – a hefty 33.69 days late on average.
Max Firth, UK managing director for Experian’s Business Information Services division, says: “Understanding how quickly clients are paying their invoices provides firms with an early warning sign of potential issues, enabling businesses to plan accordingly for any debt or work with firms that are showing signs of struggling, to manage any potential loss.”
Of course, as a prudent supplier, you may simply choose not to work with customers who cannot pay on time, or to be more strict on their credit limits and invoice deadlines.
Understanding your clients’ payment speed gives you the power to make these informed decisions, rather than scrambling in the darkness to set across-the-board payment terms that some customers may simply fail to meet.
And with effective credit control in place, you can drive down the overdue figures proactively – helping to knock one more day off of the total in 2013.