At the best of times, a big customer paying late can make invoice processing less efficient, generating hidden costs. But for many small businesses, a late payment triggers cash-flow problems that affect the entire company, hurting profits and productivity at each step. Rather than holding customers solely responsible, companies should take a hard look at how their invoice management may be contributing to the problem.
In many cases, payment issues begin with the company that sends out the invoice, according to an article on CFO.com. Payment software company TermSync surveyed 100 accounting executives and evaluated 10,000 past-due invoices, revealing some unexpected causes of late payments.
It’s true that the customer is sometimes to blame: 27 percent of those surveyed cite problems with the customer’s cash flow and communications. However,nearly half of late payments are caused by invoice errors.
In other words, an organization can solve many late-payment problems by eliminating errors in its own invoice management. In essence, the key is to reduce any obstacles to timely payment.
A data-entry error, like using the wrong purchase order number, can bring the payment process to a halt until the vendor begins following up on a late payment. Sending paper invoices instead of efficient electronic invoices introduces another potential hurdle, since the customer will likely need to enter the data again or scan the invoice before it can be paid.
On the other side of the equation, organizations can avoid racking up fees for late payments and keep the peace with vendors by using AP automation to streamline invoice processing. Using an automated system can provide savings in additional ways, from replacing costly and inefficient manual procedures to identifying opportunities for early payment discounts.
In the end, both vendors and customers can benefit from more streamlined and efficient invoice management. An automated software solution like Chrome River INVOICE can help organizations increase accuracy, reduce the number of late payments, and capture additional savings and discounts.
We’d like to hear about your experiences. Would you agree that nearly half of late payments begin with invoice errors? Share your thoughts in the comments section!
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Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care.
We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.