It happens to the best of us: You lose track of time and miss a payment due date. Dealing with delinquent payments is frustrating, but when it’s your money at stake, past due payments go from frustrating to potentially harmful. Fifteen percent of B2B receivables are overdue, and it isn’t necessarily the customer’s fault. What causes overdue commercial credit payments, and how can companies mitigate these issues to avoid serious financial problems?

Understanding how discrepancies occur

On the creditor’s side, overdue receivables are usually related to outdated manual processing systems. Tried they may be, but they are no longer necessarily true. Manual processes are slow, inefficient, and prone to human error. When everything is manual, tracking and correcting A/R mistakes takes additional time as well.

Paper-reliant processes compound the problem. Paper is delicate and easily damaged or lost. When your company’s financial processes rely on paper, everything from natural disasters to spilled coffee poses a risk that can ruin hours of employee effort and destroy potentially essential financial information.

Effects of overdue A/R

Overdue payments are bad enough in small numbers, but when they reach as high as 15%, they can have serious financial implications. Tracking and solving A/R processing issues costs additional money, and company revenue is lost as time passes and payments continue overdue. Collection can quickly devolve into a costly cycle as new payments are delayed, previous overdue balances are paid down, and others remain in default.

What can commercial creditors do to recover from this financially destructive A/R cycle?

Minimizing damage

Payment process automation is the most significant step a business can take to address recurring overdue receivables. Most A/R issues on the creditor’s side are caused by inefficiency and human error — problems easily mitigated with automation technology. Data entry, payment and invoice processing, and error correction are faster and easier with automation.

Beyond technology, educating employees and commercial credit customers is essential. Knowledgeable employees who are comfortable with the A/R systems and workflows they use are less likely to make mistakes and more likely to catch and correct them. Informed clientele understand the importance of timely payments and clear communication in case of problems.

Outsourcing collections is another solution for complicated A/R issues. It can relieve the burden of pursuing delinquent payments and put your overdue receivables in dedicated, expert hands.

Overdue receivables disrupt your business beyond their immediate monetary effect. Time spent collecting overdue payments — and the limited availability of funds in the interim — can have ripple effects and potentially dire financial consequences. Mitigate existing problems and minimize future risk with technology, training, and expert assistance.

Need help managing your commercial credit risk? MSCCM financial experts can assist you. Contact us today.