By my own experience in many years of credit management, the number one reason for non-payment is “I’m sorry, we did not receive your invoice, could you please resend it to me”. And of course, this happens after the due date has expired. Regarding DSO measurements, the days sales outstanding are already: “due date + days extra”. No matter what business or industry you are working in, it happens all the time and everywhere.
So no matter how good your credit control team is instructed, no matter how good your credit management software is, it is an everlasting excuse that helps the other party to pay later, putting pressure on your cash flow.
So you think you cannot do much from your side but resend your invoice and hope your debtors will pay promptly upon receipt. But unfortunately, you know this will not be the case. Your debtor’s Accounts Payable process has just started. And before they are going to pay you, the whole process needs to be fulfilled. Sometimes, putting more pressure on your debtor’s Accounts Payable department speeds things up a bit, but you have to wait for at least two weeks or more in many cases.
There is something you could do, to turn this situation around and dismiss the excuse forever.
The way you send your invoice is key in this well-known dilemma. Invoices that were sent by post do get lost along the way; invoices sent by email sometimes disappear or are not delivered due to technical issues if they were not simply sent to the wrong person. But tracing those invoices is difficult and an excuse is easily made.
Electronic invoices or e-invoices solve this problem. They are not PDF invoices, but computer-generated invoices in a language called XML.
An e-invoice is a digital file that contains all the information you find on a regular invoice, the difference being that an e-invoice can be read by computers without any error. Whereas PDF files usually are sent through mail, electronic invoices are sent and received by portals. When portals are set up between two parties, you can rely on the fact that the other party will receive their invoice immediately and without error because the XML format will be received directly into their Accounts Payable system. Last but not least, because the portals contain track & trace information, you as the sender know exactly where the invoice is and if it has been received.
Problem solved! No more excuses and payments should be made on time, unless there is another reason for non payments. But this is the part your credit control department gets in.
For an optimized cash flow and DSO, don’t just look forward to getting it, also take a look behind youDavid Busby
Besides the advantage of knowing your invoice is received, there are a few other advantages you should take into account.
Bearing in mind that Electronic Invoicing only has advantages in terms of your cash flow, reducing DSO, Electronic Invoicing does not happen by itself. There are a few steps you need to take before you send your first digital invoice.
So look behind for a change and see what your invoicing process can do for your cash flow ambitions. It is not just the one on top of mind that gets paid first, but who will receive the invoice in the best and most efficient way.
Interested in what Electronic Invoicing can do for your organization and cash flow? We are more than happy to help and guide you through the process and possibilities.