6. Late payments as a business model

This article forms part of the PWFO Swiss Certified Newsletter Series under Empowered Finance Professional examining systemic weaknesses that place MSMEs, solopreneurs and businesses at a structural disadvantage.

Post: Late payments often shift working capital needs from larger buyers to smaller suppliers. That imbalance weakens the whole chain.

Refelect: Read if you are financing someone else’s delays.

Tags: #LatePayments #WorkingCapital #SupplyChain #SmallBusiness

What to do if you are financing someone else’s delays

1. Measure the real cost

 Calculate:

 * Average days sales outstanding

 * Cost of capital on overdue invoices

 * Margin erosion caused by delays

 Put a number on the hidden subsidy you are giving.

2. Tighten payment terms

 * Shorten standard terms

 * Add late payment interest clauses

 * Request deposits for new clients

 Terms must reflect risk.

3. Segment your customers

 * Reliable payers → standard terms

 * Slow payers → advance or partial prepayment

 * Chronic offenders → reconsider relationship

 Not all clients deserve the same trust level.

4. Invoice faster and cleaner

 * Issue invoices immediately

 * Avoid documentation errors

 * Confirm receipt

 Delay often begins with poor admin discipline.

5. Introduce early payment incentives

 Small discount for payment within 7–10 days can improve cash flow more than chasing debt later.

6. Use receivables financing strategically

 * Factoring

 * Invoice discounting

 * Supply chain finance

 Price it and compare with margin impact.

7. Escalate professionally, not emotionally

 * Clear reminder schedule

 * Call before due date

 * Senior level follow up for repeated delays

 Make payment discipline part of your culture.

8. Walk away when necessary

 If a client systematically uses you as a bank, the relationship is unbalanced. Protect liquidity before revenue.

If you are financing someone else’s delays, you are reducing your own growth capacity.

Correct it early, before it becomes normal.

Read if you are financing someone else’s delays.

#LatePayments #WorkingCapital #SupplyChain #SmallBusiness