Every entrepreneur struggles with the question: how do I get my invoices paid faster? Also in the automotive and transport sector, you can still gain a lot with a better order-to-cash process. We will help you on your way with four tips.
The good news is that the number of days that an invoice is outstanding (the DSO) at companies is steadily reducing in recent years. Just before the corona outbreak, companies paid their invoices after an average of 39.5 days and that was more than a day faster than a year earlier, according to figures from business information specialist Graydon. Fortunately, the corona crisis has not broken this trend, according to the MKB Monitor by software company Exact, among others. On average, an SME receives payment for a business invoice after 32 days.
Payment behaviour: the differences are big
In the automotive sector, entrepreneurs generally receive their money more quickly: the average payment term is about 25 days. But the differences are big. A dealer who sells passenger cars usually receives the sale amount after 23 days, while the trade in heavier commercial vehicles must wait no less than 40 days for payment. Moreover, in this sector, three quarters of the invoices are only paid after a reminder. The longer payment term is explained by the fact that commercial vehicles are purchased by (large) companies, where payment behaviour is very different from that in the business-to-consumer market, where different payment terms are used. Therefore, invoices are often paid late, even in the automotive sector.
Transport companies often have to wait much longer for payment: more than 42 days on average. And about three quarters of the companies only get paid after the final payment date. Annoying in a sector where running costs are very high.
Getting paid on time means better cash flow: four tips
Further reducing the payment term is good for cash flow and that is certainly important now. Because of the major role of the Internet in the orientation process of consumers, the emphasis for car dealers has shifted to ensuring a large stock. And that has to be financed.
But how do you get your customers to pay up sooner? Increasingly, the use of smart technology is making the difference in improving the company’s cash flow. There are measures you as a manager can take to get paid faster.
1. Smart technology
While many companies still rely on Excel for their financial administration, this is really not up-to-date. There is a variety of smart and at the same time very user-friendly technology available to help you collect outstanding invoices faster. Digital invoicing from your own accounting system alone saves an enormous amount of time. Moreover, the customer can respond immediately and decide how he or she wants to receive the invoice. That can be via SMS, e-mail or even WhatsApp. We can now also make location-independent payments very easily with a single click.
2. Check the creditworthiness
It can be useful to check the creditworthiness of (new) customers. Depending on the size of the order and the duration of the relationship, this does not have to be a one-off action. There are now all kinds of smart tools available that continue to monitor the creditworthiness of the customer throughout the year. This prevents unpleasant surprises.
3. Tailored dunning
Not every manager involved has sufficient insight into the customer’s profile. A good insight does not end with establishing the creditworthiness. When you get to know your customer well, this can be a reason to approach one customer differently from another. This applies, for example, to payment terms, but also to the manner of sending reminders. Specialised software helps you with this customised dunning. Fully automated. This often prevents the route to collection agencies and bailiffs.
4. Take out credit insurance
In the unlikely event that the payment risk is too high, then credit insurance is no superfluous luxury. Please note that credit insurance companies assign a different, often limited, limit to each debtor. So be aware of the fact that credit insurance is not a panacea. Smart technology ensures that you stay within the limits of the policies you have taken out.
Naturally, every credit manager wants customers to pay as quickly as possible. With the right order-to-cash process and relevant customer data, you have in any case done everything to make 2022 a better year for payments.
Want to know more?
Read all about our solutions and how they can support your processes.