Customers with a Days Payable Outstanding (DPO) policy may delay payments even if they are past due. Customers adopt these policies to conserve cash and reduce interest expense. It doesn’t matter what your payment terms are, customers will pay according to their DPO policy, even if it results in late payments.
DPO policies can cause friction between customers and vendors. They can increase costs for customers and result in supply disruptions. Suppliers have to decide how or whether to continue doing business with customers who delay payments due to DPO policies.
Here are some ideas on how to handle past due accounts with DPO policies.
Communicate Credit Policy
It is important to have a credit policy, and to make your customers aware of it. If a customer has a DPO policy and is delinquent in payments, send them a copy of your credit policy. Make sure they understand the possible consequences of late payment. For example:
- Credit standing – Late payments may negatively affect credit standing with your company and other suppliers.
- Late charges – Past due amounts may incur interest and late charges.
- Deposits or prepayment – Prepayment or deposits may be required to place orders.
Increase and Customize Reminder Emails
Increase the number of reminder emails to fit the customer’s payment profile. Tailor the email content to fit the circumstances. Regular collection emails are less likely to have an impact on DPO payers.
Increase and Leverage Personal Contacts
DPO customers should be contacted more frequently. The message should be consistent with your credit policy. Leverage personal relationships to obtain on-time payments.
These ideas require more time to implement. Automated AR solutions can give your team the additional time they need to work with DPO payers.
Digital Solutions
On-time payment issues are a less of a problem for companies with digital solutions. Accounts receivable and accounts payable cloud-based solutions with customer/vendor portals and digital processes keep vendors and customers connected whether they work remotely or not.
Digital solutions can reduce or eliminate late payments. They minimize the issues that can cause delays in processing payments, resulting in increased efficiency, reduced costs, and increased profits and cash flow.
With a connected accounting solution for your accounts receivable and accounts payable teams to coordinate work with customers and vendors, you can go digital and enjoy the benefits of office automation.
Lockstep, a leader in cloud-based connected accounting solutions, can help you boost productivity and optimize cash flow with:
- Digital Onboarding – Collect master data directly from your customers and vendors
- Accounting Inbox – Make it easy to divvy up work and track progress
- Smart Automation – Automate menial task with accounting integration
- Online Accounts – Give customers and vendors online access to their accounts
Lockstep is an experienced software partner that can help you increase efficiency and accelerate cash flow.
If you would like to learn more about how you can benefit from connected accounting solutions, please contact Lockstep at www.lockstep.io
