3 Hints Right on The Money, Handling Past Due Supply Chain Invoices

This month we have done a short survey among the users of TrucksOnTheMap, asking them 4 simple questions about their experience with the truck-booking-map and the most demanding current issues at their company. A surprisingly high number of the response named the late paid and even unpaid freight invoices as the reason of their headache.

So, we have taken the time and investigated the figures and the background of the payment morals in the European Supply Chain.

In May 2016 there was the latest report (“Payment Practices Barometer 2016”) issued by Atrabius Group saying, that regardless of the reason why customers pay invoices late, this behavior appears to have adversely impacted European companies in a number of ways: ripple effect throughout the whole supply chain, loss of revenues and a need to take specific measures to correct cash flow. This means financial pressure on businesses especially in construction materials, machinery, and paper industry, of course, rolled-out to the logistics sector.

Due to the report, there is no significant difference between West and Eastern Europe in this matter. The figures West versus East were: 60% vs 54% of the invoices was paid on time, 39% vs 45% was past due and 1,3% vs 1,2% noncollectable. The tendency shows, however, a slight percentage increases in noncollectable payments over the past 3 years.

Source: https://group.atradius.com

Late payment of invoices from B2B customers caused 27.2% of respondents in Eastern Europe (above the 23.7% in Western Europe) to delay payments to their own suppliers. Based on our survey results, Turkey is, however, the hardest hit country by late payment from export customers. 53.1% of the total value of Turkish export sales on credit (up from 49.8% last year) were paid late.

As observed in Western Europe, companies in Eastern Europe also try to minimize payment risk by keeping the time it takes to turn credit sales into cash as short as possible (around 30 days or less from the invoice date).

Receivables are reported to be uncollectable mainly due to the customer being bankrupt or out of business. Another common reason of write-offs is due to the fact that the customer could not be located, the debt was too old, or the additional costs to pursue the debtors were too high.

The best way to get paid on time is to work with clients who have a track record of always paying on time. As a logistics provider, you are as good as your network. Create A+ network of customers and hauliers. Handle your approved partners’ community as one of the most crucial assets of your corporation.

Keep your information flow transparent and quick. Keep customers informed about estimated time of delivery, and send proof of delivery promptly. Use an acceptance letter – proof-of-delivery states that the shipment has been delivered to the client’s satisfaction. It should be signed by the client once the work has been completed.

Add a good follow-up system. If a potential client does not have a good payment track record, you should not give them 30 days credit. Otherwise, you will see those invoices quickly turn into bad debt. Keep one eye on “almost due” invoice list and contact the customer before the due date, just to remind them it’s close.

Above all, always treat clients with courtesy and professionalism. Never break this rule, even if they are not paying you and are not behaving professionally. You will have better luck collecting slow-paying invoices by remaining professional.

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