Tackling the burden of late payments and unpaid invoices
- Late payments: a major cause of poor cash flow
- How businesses are negatively impacted by late payments
- Preventing and tackling late payments and unpaid invoices
- How MyBank payment links can improve collection rates and efficiency
Chasing payments is costing Europe a quarter of a trillion euros a year. [1] The impact of late payments on the expansion and prosperity of European businesses are becoming more and more significant. One in four bankruptcies are due to invoices not being paid on time.
2024 will see a focus on efficiently managing credit and liquidity due to inflation and rising interest rates.
Late payments: a major cause of poor cash flow
Late payments are a common issue for small and mid-sized businesses, and they can have severe repercussions on a company’s cash flow, stability, and market confidence. In the EU, on average, one out of two invoices in commercial transactions are paid late (or not at all). Late payment creates a domino effect that leads to more: every late payment causes another four. [2]
In Europe, 70% of EU companies confirmed that being paid on time would in turn also allow them to pay their own suppliers on time. [3]
How businesses are negatively impacted by late payments
Research has found that European companies spend an average of 10.4 hours a week chasing clients/customers for payment (such as sending reminders and making phone calls), which makes 74 days on average in a year.
Organisations are having to commit significant resources to address the problem, detracting time and energy from other crucial duties.
Preventing and tackling late payments and unpaid invoices
Here are three actionable steps businesses can take to get their invoices paid.
Establish a clear late payment policy
One of the most proactive steps to avoid late payments is to set clear late payment terms from the beginning. Having clear terms and conditions can help avoid confusion that can result in unpaid invoices.
A formal policy establishes deadlines, penalties for late payments, and acceptable payment methods. This makes invoice payments transparent to both parties and reduces the possibility of future disputes.
Encourage advanced payments
Offering early payment discounts or other incentives for prompt payment is a good idea to avoid payment delays. By doing this, businesses may decrease the amount of time spent pursuing payments and enhance their cash flow.
Be Proactive with payment reminders
Before the invoice due date, kindly remind clients to make their payments on time.
Send a follow-up, more forceful reminder for past-due invoices that mentions the late payment policy and any additional costs incurred.
How MyBank payment links can improve collection rates and efficiency
When it comes to preventing and managing late payments, an effective solution is provided by Pay-by-Link solutions offered by banks and other Payment Service Providers (PSPs). These allow any business to get paid online through a payment link sent to customers via their preferred channel, including email, SMS, WhatsApp.
By activating MyBank payments through a Pay-by-Link solution, companies will be able to benefit from the real-time certainty of the collection thanks to the immediate confirmation of the irrevocable bank transfer, with no need for intermediaries, lower transaction costs, enhanced security features, and frictionless payment experiences. Part of the alternative payment methods currently changing the payment scene, MyBank is based on the account-to-account (A2A) system ensuring quick and secure settlements involving a direct bank account to bank account transfer of funds via the payer’s online banking portal.
Collecting payments with MyBank through a Pay-by-Link solution does not require any acquisition of new equipment, any significant investment or changes to the company website and it offers a flexible, efficient tool for:
- Sending customers a reminder via email or sms containing a payment link for prompt action before the invoice due date, eventually mentioning early payment discounts or other incentives;
- Sending customers a follow-up via email or sms with the payment link on the invoice due date;
- Sending customers a reminder via email or sms for past-due invoices with the payment link for immediate action.
The key benefits for businesses/payees include:
- Complete visibility of payments status through the dedicated account, allowing real-time monitoring
- Faster payment issue detection
- Real-time certainty of payment collection 24/7
- No maximum transaction amount limit
- 100% automatic riconciliation
- No need for a POS device or any new dedicated equipment
- Higly competitive transaction commission fees compared to other digital payment methods*
- No interchange fee
Here you can find more benefits that businesses could unlock through greater efficiency with MyBank payment links.
*commissions may vary from a bank/PSP to another as defined directly by them
[1] European Payment Report 2023 | Intrum
[2] What effect can late payments have on small businesses? | Euronews