New credit and collection standards: Current default rates

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What are your company’s default rates? 15% of business-to-business receivables are currently past due.

So says the new B2B payments innovation readiness report, a collaboration between PYMNTS and American Express.

No one wants to postpone old aging into a new year.

With just over a month to go to 2021, discover some compelling reasons to act quickly with a team effort to start the new year with a healthy cash flow position.

The matter of rapid follow-up

Businesses have ZERO time to waste when contacting delinquent customers. Withholding can be very costly:


  • Businesses that wait an average of 45 days to follow up on overdue payments have 26% of their overdue receivables, while
  • Companies that follow up within five days of late payments have an 8.8% delinquency rate.

As a result, your most proactive peers benefit from arrears rates 40% lower than the average. That translates to a ton of money!

Your own credit and collections team probably understands the urgency and the net impact of prompt action. (Although you can compare to see how your own department’s delinquency rate stacks up.)

But this information could simply get other groups essential to the collection process to become more involved, including:

  • Sales. Need your sales force to get more involved in your collection process? These numbers can help explain why a holistic approach is essential.
  • THIS. Greater automation can have a substantial impact on the efficiency of your collections. Share these new stats to get higher on the tech priority list.

A focus on two fronts for delinquency rates

Whether you’re enlisting in sales, IT, or just going it alone with your existing finance teams, you want to focus on two fronts:

1. How you prioritize collections. How strategically is your team managing this critical task? Consider adopting a more risk-based approach compared to the traditional approach to amount owed and overdue.

Dun & Bradstreet employees advocate taking into account customer data such as company credit scores, trade payment history, and financial statements when determining how to prioritize collections.

2. The speed with which you send payment reminders. People don’t necessarily have to jump on the phone. When speed is everything, a well-designed email can help.

Just make sure the subject line contains the words Payment Reminder, Invoice Number, and Due Date. Then attach the invoice or send a link to your portal to eliminate additional delays.

Jennifer azara

Jennifer, a staff member of CFO Daily News, has been covering business and finance for over 22 years. She has written for CFOs, credit and collection professionals, and accounts payable practitioners, and has spoken at industry conferences on sales and usage tax compliance.


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