Late payments – time for action
Economic headwinds may be stiff, but there is a lot businesses can do to tackle late payment and protect themselves. The question is, are they doing it?
Intrum’s 2022 European Payment Report found many of Europe’s businesses taking precautions against late payment – with prepayment increasingly deployed as a preventative action. Almost half of those surveyed (46 per cent) were using this as a strategy, with credit checks used by a third and credit insurance by a fifth.
However, many are floundering when it comes to improving recoveries and tackling late payment when it occurs. More than one in four (26 per cent) feel late payment threatens their survival, yet 53 per cent say they lack the talent and resources to improve their management of the issue.
This is something businesses need to consider. I’m looking out of the window right now and I see a large accountancy firm that has just announced plans to expand their operations and recruit 500 people. If you cannot match the packages that these firms offer, you will see talent going elsewhere.Szilard Szarvas, Risk and Customer Service Manager at road toll collection business Eurotoll
In addition, outdated back office systems are making life tough – 46 per cent describe their finance and administration systems as seriously outdated. That means businesses are struggling with late payment challenges that could be solved with the right talent and technology.
So what are they doing when someone pays late?
In many ways this is strange. While legal action is an important tool in recovery, we see it as a last resort that is often unnecessary and can be expensive. We find talking to customers and learning about their circumstances, offering automated and digital services and negotiating payment plans extremely effective. By jumping to legal action too quickly, businesses may be missing steps in the process that could secure payment and better preserve the customer relationship for the future.Pia Bach Jensen, Global Front Office Director
The good news is that three quarters of the firms we surveyed are making improving their debt management a strategic priority for the business in 2022.
Early intervention is critical when it comes to late and non-payment. If a customer is in financial difficulty, helping them face up to it sooner minimises the losses and maximises the solutions available to them. Businesses should be making use of technology, third parties and partnerships to ensure they act quickly.Martin Brage, Global Product Development Director
Eurotoll’s Szarvas agrees. “As soon as we identify a pattern with a customer – an increasing number of days to pay, for example, or rising payment delays – we need to have a conversation about what’s going on.”
With 60 per cent of businesses worried that the risk of late payment will grow this year, it’s time to take action.
Read the full report
The insights from this article are based on the European Payment Report 2022. You can download the full report below.
Late payment legislation: rule of law or business choice?
Late payment is unfortunately common in the business world, causing cash flow difficulties for small and medium-sized businesses and even threatening their survival. Various attempts have been made on both the European and national levels to tackle the problem but is enough being done?