October 12, 2023Invoicing , Late Payments
For many wholesalers and B2B product sellers, relying solely on an Account Receivable Aging Report can be a grave oversight.
At PencilPay, we understand the complexities of credit management, and we delved deep into the heart of the issue to uncover insights that can change the way wholesale businesses can handle their finances.
The Limitations of Traditional Reports
An Account Receivable Aging Report offers a snapshot of your overdue invoices, but it lacks actionable steps.
To truly grasp the financial health of a business, we decided to take a look at the payment terms offered by wholesalers.
In our extensive research, encompassing 100 product sellers spanning 17 diverse industry verticals, 35,000+ wholesale customers, and over 500,000 invoices, we unearthed significant trends that you might find helpful.
Decoding the Numbers
Our findings painted a revealing picture. Astonishingly, 73% of stock is sold on credit terms, but nearly two-thirds of these invoices are paid late.
On top of this, a staggering 4% of invoices take more than 120 days to collect, and half of that amount is never recovered.
Delving deeper, we analyzed invoices across 7-day, 14-day, and 30-day terms. The results were eye-opening.
Unveiling Alarming Trends
In the 7 & 14 day bucket, payments were consistently delayed by an average of 7 days.
However, the real concern emerged in the 30+ day bucket.
Invoices in this category were paid, on average, 26 days late. More alarmingly, these invoices constituted 38% of turnover, 85% of total overdue amounts, and the lion’s share of bad debt.
It became clear that businesses offering extended payment terms needed to safeguard themselves against financial risks.
The Path to Financial Stability
For wholesalers and B2B product sellers, implementing robust practices is crucial.
Establish clear payment terms, set credit limits, and create a structured escalation process.
Legally vet your customers, ensure comprehensive and accurate credit applications, and collect payment methods or signed guarantees.
Having a streamlined method to charge and reconcile payments is paramount.
PencilPay: Turning Best Practices into Action
At PencilPay, we recognize that these best practices aren’t just guidelines; they’re lifelines for businesses.
That’s why we’ve translated these principles into powerful software. PencilPay is more than a platform; it’s your partner in financial stability.
By automating credit applications, payment processing, and reconciliation, PencilPay empowers businesses to thrive, even in the face of challenging payment landscapes.
If you’d like to get a demo of the PencilPay platform, and see how it can work for your business, click here.