Customers paying late ?

Customers Paying Late? Here is Why!

The invoice due date and its timely payment is crucial for any business to remain afloat. One of the least pleasant experiences for business owners is to chase late payments. As per a report by Atradius on payment practices – Indian economy is doing well with a bright future prospect.  A stable political situation, low commodity prices & foreign direct investment is benefiting the economy. Despite the positive outlook the business climate in India has some hurdles to cross.  The delay in payments could worsen the liquidity position besides increasing the financial and administrative costs required to carry long outstanding trade receivables.

The survey of B2B payment behavior for India is as appended below.

Credit Sales – 52% of domestic B2B sales in India is in Credit while the same for foreign B2B is around 39%, reflecting a preference for Indian buyers.

Overdue B2B Invoices – Due B2B receivables in India: domestic 55% | Foreign – 51%, the percentage is above the average of APAC (44%)

Average DSO – The average DSO (Days sales outstanding) is 48 days and is the longest in Asia-Pacific (regional average is 41 days)

Payment Term– Asia-Pacific average payment term is 32 days while India is at 30 days (One Month)

Payment duration – Indian Suppliers turn overdue into cash, on average, around 65 days from the date of invoice which is above the average of Asia-Pacific (60 days)

Uncollectable Receivables – 2.7 % of the total B2B receivables was written off as uncollectable

Payment delay domestic B2B Invoices

Key Late payment factors – B2B 

Top 5 key factors causing delays in payment for India domestic invoices:

  1. Insufficient availability of funds (46.2%) – A major reason for late payment is availability of funds due to poor /slow economy, high commodity prices or the business not having enough to repay.
  1. Quality Dispute (27.9%) – Dispute over quality of goods or services provided. Lack of exact terms of the trade or miscommunication at the time of order placing could also be a big factor.
  1. Complexity of Payment procedure (30.3%) – most often due to complexity of the procedure the payments are delayed. Different rules & regulation, multi-level signatories and changes in currency are predominant factors.
  1. Form of Business Financing (40.4%) – Using the funds to grow own business than pay the dues causes longer cycles of repayment.
  1. Delivery not corresponding to Contract (35.1%) – Late payment occurring due to product/service not corresponding to the agreed contract. Not adhering to what was agreed upon causes delay or non-payment.

 

How KredX can help your business beat the above late payment challenges.

KredX is a unified Invoice Discounting Platform. Invoice discounting is a way through which the small businesses can use these unpaid invoices to raise instant cash. These small businesses can sell these invoices to investors (individual/institutional) at a discount rate and raise the money upfront. It provides an alternative source of finance to businesses allowing them to free up cash tied up in unpaid invoices to alleviate short-term cash flow problems.

B2B Sales on Credit

Key Features – KredX

      1. Get funded in 48-72 hours.
      1. Less Documentation – once registration is completed. Future documentation requirement is very minimal. No collateral or bank-guarantees are required.
      1. Transparency – No hidden or opaque fee structure. Simple fee structure which is pre-determined at the time of funding.
      1. Flexibility – no contractual obligation to use KredX for all/any financing needs. Businesses can come and go as they like.

Also Read : How Can Invoice Discounting Help Your Business?

Reference : Payment Practices Barometer India 2016  | Atradius ( Link )

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