Although the economy is gradually rebalancing after the pandemic, the negative trend in accounts receivable (AR) over the past 12 months has not eased. Businesses still need to be vigilant about the hidden losses caused by overdue invoices.

According to Atradius's latest Payment Practices Barometer, in 2023, approximately50% of business-to-business (B2B) invoiceswere paid late. Dun and Bradstreet's report further shows that the construction, commercial, and professional services industries were hit hardest, with one-third of payments in these sectorsoverdue by at least 91 days。

Even if your business is not directly involved in the high-risk industries mentioned above, dealing with overdue accounts over the long term—equivalent to providing interest-free loans to non-paying customers—or continuously writing off new revenue as bad debt can be exhausting. If you expect the economic recovery in 2024 to naturally resolve serious AR issues, you may need to reconsider. Now might be the time to redouble efforts, tighten invoicing and collection processes, and prevent losses from accumulating.

Here are 6 key recommendations for you to discuss with your finance and invoicing teams:

1. Fully understand your AR exposure

What have key metrics such as Days Sales Outstanding (DSO), aging analysis, and collection effectiveness index revealed over the past 12 to 18 months? Assess whether your ability to collect overdue amounts is improving or declining, and check the status and total of your most delinquent accounts.

2. Re-evaluate invoicing and collection systems

Do current systems require major upgrades? Worse, are semi-automated or even manual steps slowing down invoicing and collection efficiency? Ask your team for honest feedback: Can customer relationship management (CRM) technology handle the business challenges of 2024? You may need to invest in new systems or improve existing ones, along with employee training to ensure smooth implementation.

3. Review invoicing and payment terms in customer agreements

It is best to have a lawyer review the relevant terms with you. Are there ambiguities or inconsistencies that make it difficult to take action against non-paying customers? Do the agreements clearly express your expectation of full and timely payment, and clearly specify the consequences for customers in case of default?

4. Pay attention to the impact of internal "silos" on defaults

If new business teams and finance teams do not collaborate well, AR issues can worsen. The best way to prevent inefficient patterns is to ensure sales and marketing teams understand that qualified customers should have the ability to pay and a good track record of taking accounts payable (AP) obligations seriously. Everyone should know the company's credit approval standards—sales representatives should never casually promise credit limits upfront. New customers who have not yet met standards can start with cash transactions or limited credit limits, which can be relaxed once they prove their creditworthiness.

5. Treat invoicing as a key part of customer care

Billing disputes are one of the main reasons for late payments.Now is a good time to sort through the various issues that have caused payment delays over the past 12 to 18 months. Talk to your invoicing team to understand the most common customer questions they handle, and identify the key billing issues that cause confusion, conflict, and dissatisfaction.

6. Take early action when accounts become overdue

In 2023, how long did you wait on average before contacting overdue customers? If the answer is more than 31 days—or more than 16 days if your payment terms are net 15—you missed the opportunity to resolve issues early. Early notification combined with a commitment to quality service can prevent many billing disputes from escalating. When an account becomes overdue, contact the customer through all available channels, express your belief in their willingness to resolve it, and clearly state that if the balance remains unpaid, you will take prompt follow-up action.