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Don't Make Customers Wait to Give You Money

How to determine whether your billing function is leaving cash on the table.

By Pat Okonek | Updated on February 08, 2017
Payment delays caused by invoice discrepancies can increase past-due accounts receivable and act as a substantial drag on corporate cash flow. Even companies that have an exceptional product or service may not get paid because of billing errors. Inaccuracies in billing create self-inflicted wounds that degrade the quality of the organization’s receivables.

Fortunately, there are some straightforward actions that corporate treasury professionals can take to determine whether their company is leaving cash on the table. And for those who find a problem, there are clear-cut steps to tackle solving it.

Rooting out Problems with Billing Quality

Most customers withhold payment when an invoice contains a material discrepancy other than shipping charges or trivial differences in price or quantity. In these situations, there’s more at risk than the discrepant amount. Even when a dispute amounts to a small fraction of the total bill, companies commonly delay any payment, pending resolution of the dispute.

Such a delay can have a serious impact on the seller’s receivables. Contracts and purchase orders usually stipulate that the terms clock begins on receipt of a valid invoice. So until the customer receives a valid invoice—i.e., an invoice free from material discrepancies—the payment doesn’t even have an established due date. And although payment terms vary widely, some firms have insisted on extending their payables from the once-standard 30-day or 45-day terms to 60- or even 90-day terms. If the seller doesn’t detect billing issues until the payments are due, payment cycle times can double. For businesses starting at 90-day terms, billing errors may mean more than half a year passes between the customer’s receipt of the billed goods or services and the seller’s receipt of payment.

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