Late Payment of Commercial Debts
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Excuse 19: You did not send a reminder

Applicability

Relevant mainly on long term (e.g. 30 day) invoices where customer does not pay on time.

Underlying reasons

Customer is able to pay in a short time, but has long payment terms
When customers try and pay as late as possible, they need to sit on an invoice for a while before starting payment, so they need to somehow remember when to do this. Some customers feel it is the suppliers job to send a reminder. There is no obligation on the supplier to do so
Experience suggests sending a reminder before the payment is overdue annoys customers as they were about to send payment anyway. Sending after it is overdue is pointless, when you can just send the late payment penalty invoice anyway
Customer pays on statement not invoice
Some customers file away invoices expecting to get a monthly statement from suppliers. Then, they check the statement and pay. This basically means the customer is disorganised. There is no obligation on a supplier to send a statement or reminder or organise the customer in any way.
The invoice is the formal document requesting payment and that is all that needs to be sent
Customer does not believe they have an obligation to adhere to the agreement they have made
Customer probably has a fundamental misunderstanding that they don't have to do what was agreed, but that it is fair to do whatever they can get away with and feels aggrieved that they failed to get away with paying late when they usually do (with other suppliers).

Resolution

  • If a customer has to sit on an invoice when they get it rather than paying it, then the payment terms are simply too long. The payment terms are not an interest free loan with every purchase, but a period of time in which to pay. If the customer only needs 3 days to make payment, then they should be on 3 day terms (well, maybe 7 day to allow for bank holidays, etc). Suggest that the payment term be reduced to match the time it takes to make payment and so avoid the need for reminders.
  • It is not a bad idea to have a system that sends statements anyway, before things are overdue.