- Throughout 2022, B2B invoices were paid 21 days late on average.
- The statutory payment period for B2B invoices is 30 days.
- 42% of all companies suffer from liquidity problems due to late payments.
- You can protect your business from non-payment risk by implementing practical measures and using a B2B payment provider.
Payment terms in B2B can often be agreed individually between the parties. However, many buyers miss the payment deadline. On average, creditors* worldwide experienced a delay of around 20.7 days in 2022, resulting in an average total payment cycle of 53 days from the issuance of the invoice to the actual payment, according to Sidetrade data. The average delay in Germany and the Netherlands was 15 days, while in the UK, it reached 21 days.1
Delay in days
Recent crises have intensified the issue of payment delays in the B2B sector. The Coronavirus pandemic, ongoing inflation, and the energy crisis are causing liquidity bottlenecks for companies, making it harder for them to pay invoices on time.
1Average delays in days: France 19, Europe 16, Global 21
Creditor = An individual, business, or entity that is owed money or has a claim to receive payment from another party, known as the debtor.
Debtor = An individual, business, or entity that owes money to another party. In the context of the B2B sector, debtors are typically businesses that have received goods or services from another company and are obligated to make payment for those goods or services.
"Lack of liquidity is one of the most common causes of insolvencies and job losses." – Marwin Ramcke, CEO of the EOS Group.
The statutory payment period for B2B invoices
In the UK and the Netherlands, two parties are legally required to agree on a payment term by which buyers must settle an invoice, unlike in Germany where the invoice is generally due upon receipt of goods (BGB § 271 sec. 1).
The individual payment deadline must be explicitly noted on the invoice. For this purpose, a concrete date (e.g. “Please transfer the amount by 01.05.2023”) or a period (e.g. “Please transfer the amount within the next 60 days”) should be defined.
If no agreement has been made, the standard payment period in the UK is 30 days. The same applies to domestic business transactions in the Netherlands (Civil Code Art. 6:119a(4)). In Germany, the legislator also grants customers a payment period of 30 days after “the due date and receipt of the consideration” if no individual agreement has been made (BGB § 286).
The risks of late payment
Invoices paid too late or not at all can have fatal consequences for companies – especially when high order values are involved, as is often the case in the B2B sector. Merchants face a spectrum of risks that encompass potential profit loss, liquidity bottlenecks, and unpredictable cash flow. These risks can pose a significant threat to their survival, particularly for small and medium-sized enterprises.
In a study by EOS Solutions, 42 percent of the B2C and B2B companies surveyed in Europe reported suffering from liquidity bottlenecks due to delayed payments, and 51 percent of the companies had lost profits as a result.
Get more out of your payments with Mondu.
These are your rights when B2B customers do not pay
- If an invoice is not paid on time, you, as a merchant, have the right to charge a late fee of 8%.
- You are allowed to initiate a dunning procedure in case of late payment – however, this is not an obligatory prerequisite for further legal steps.
- You may levy costs incurred in pursuing the invoice as damages from the debtor.
- In the event of late payment, you have the right to levy a lump sum of £40 euros from your business customer.
Take these steps to get your money
Payment terms b2b: Here are the five practical steps you can follow to safeguard yourself against a cash shortage when customers delay or fail to pay their invoices
1. Send a reminder of the upcoming due date
To reduce the likelihood of a late payment, clearly indicate the agreed payment deadline on the invoice and refer to it.
If no payment has been received a few days before the end of the payment period, write a friendly email to your buyers in which you point out the upcoming payment deadline.
To create urgency, you can also carefully refer to the default interest of 5%, which you may claim according to § 288 BGB for non-payment.
3. Make personal contact
There can be various reasons why customers don’t pay an invoice on time – and there is not always malicious intent behind it. That’s why one of the best things you can do is contact your customers personally to find out what is causing the delay.
Perhaps the customer has not received the invoice or has used the wrong bank details when making the transfer. The customer may also disagree with the invoice and not want to pay you.
You can clarify these problems directly during a personal exchange and help or accommodate the customer. If everything is okay with the invoice and the customer simply forgot to pay, this also serves as a subtle payment reminder.
Overall, it’s always best to take a friendly approach if you want to maintain and strengthen customer satisfaction and loyalty. Being hostile and threatening too early can damage the customer relationship – especially if the customer made an honest mistake.
3. Send payment reminders
If the payment deadline has already passed, a payment reminder is an important way to prevent non-payment. You should remain polite and professional.
In the written payment reminder, you should specify a new payment deadline, as this increases the level of liability.
4. Send a warning
If even a friendly payment reminder does not bring the desired success, it may be time to send the first warning letter. However, it’s important to know that you are not legally obligated to write a reminder if the payment deadline is noted on the invoice. You can also take legal action, but in most cases, a reminder process precedes legal action and is also a better route to avoid jeopardizing the relationship with your customers.
In your reminders, refer to the open invoice and keep a factually neutral tone. If you have to send further reminders, you can change your tone to become more urgent and shorten the payment deadline.
Note: you can claim the costs incurred by the reminder from the debtor and charge a so-called reminder fee. In addition, as a creditor, you have the right to charge interest on arrears from the first day after the payment deadline. This amounts to five percent for companies, according to § 288 BGB.
5. Engage debt collection
If you fail to receive payment from customers after repeated requests, it’s time to initiate the collection procedure. In a collection procedure, you instruct a company to collect the money for you or you sell the debt to the company. In this way, you as a merchant outsource the collection process to an external company.
The advantages of debt collection compared to litigation are lower costs. According to Section 4 (5) RDGEG, the costs of the collection company may not exceed the costs of a lawyer.
In both cases, however, you can recover the costs for debt collection and the lawyer from the customer if you are successful.
Late payments? Pass on the risk!
Regrettably, it’s impossible to entirely eliminate payment defaults. However, partnering with an external provider can eliminate the risk and the time and effort associated with sending reminders and collecting payments.
An external provider enables you to outsource these responsibilities and significantly reduce the workload on your business. Simultaneously, you can transfer the risk of non-payment since you receive payment from the provider promptly upon issuing the invoice.
When you partner with Mondu, you can easily offer your business customers the most popular payment methods in your B2B webshop while passing on the risk of non-payment. Mondu pays you upfront after goods are shipped and handles payment collection in a professional and friendly manner. This means no stress with reminders, satisfied customers and a risk-free sale.