Late client payments: reduce delays and forecast receipts
Start with a reconciled receivables ageing report. Give each priority invoice a reason for delay, an owner and a next action, then use credible receipt dates in your cash forecast. Lower DSO can reduce funding needs; it is neither extra profit nor a collection guarantee.
For an SME or startup, the issue becomes tangible when payroll or suppliers fall due before customers pay. Financial management establishes how much can realistically arrive, when and with what uncertainty. Higher sales alone cannot answer those questions.
Start with invoices, not an average
Reconcile outstanding invoices with receipts, credit notes and contractual dates. Separate balances not yet due from amounts overdue by 1 to 30 days, 31 to 60 days and longer. A misallocated receipt can create a false overdue balance; an unresolved dispute can make a forecast unrealistic.
- For each priority balance, record the customer, invoice, amount, due date, obstacle, contact, latest response and next action.
- Prioritise by value, age, risk and impact on upcoming payments. Do not assume a fixed number of customers accounts for all delays.
- Separate disputed invoices from accepted ones. Assign commercial issues to the appropriate person.
Estimate the effect of fifteen days
Fictional example, not a client result: with €4,000,000 of annual credit sales spread evenly, reducing the average collection period by 15 days corresponds to €4,000,000 ÷ 365 × 15, or approximately €164,384 less in receivables. This simplified calculation excludes VAT and assumes stable sales, collectible balances and an actual reduction in the delay. The same calculation works in CHF when all inputs are in CHF.
A consistent indicator is DSO = average trade receivables ÷ credit sales for the period × days in the period. Use a matching tax basis in both amounts. Seasonality, deposits, credit notes and cash sales can distort comparisons. Writing off a receivable does not release cash.
A lower funding need is not recurring income. It may persist with comparable sales and payment behaviour, but growth or renewed delays can recreate the need. Confirm actual receipts before committing the amount to hiring or investment.
Prevent and follow up with a specific objective
- Before the order, agree payment terms, approval steps and appropriate deposits or milestones. A 30% deposit is an option, not a universal rule.
- When invoicing, check required references, recipient, receipt and due date. Follow the invoicing obligations applicable to the work.
- Before a significant invoice falls due, confirm approval. After a delay, request a specific payment date and the reason for the blockage.
- When a promised date is missed, follow up, record the response and adjust the forecast. A dispute or distress may warrant escalation without waiting for a standard date.
- Before suspending work or starting collection proceedings, review the contract, applicable law and action costs with an appropriate professional.
Distinguish French and Swiss rules
France generally provides 30 days after receipt or performance without specific agreement. Negotiated terms can reach 60 days after issue, or agreed 45 days end of month without manifest abuse. Special regimes exist. French Ministry guidance.
For relevant French transactions, penalties start the day after the due date without prior reminder. The €40 recovery indemnity applies once per late invoice, with required disclosures. Check scope, rate and exceptions. French public service guidance.
These French limits and indemnity are not Swiss rules. Check the contract and local process for Swiss cases; the federal portal outlines reminders and debt enforcement. Swiss federal guidance, in French.
The decision to make this week
Identify receipts that determine whether upcoming payments can be made. Assign each an action and date, then compare expected and delayed payment scenarios. Identify which spending remains affordable in both cases and which requires confirmation. This connects collections to management decisions.
If growth makes these timing gaps harder to manage, explore how to prepare decisions when growth consumes cash.
Prioritise receivables instead of chasing at random
Keep a dated list of customer, due amount, due date, reason for delay, last contact and next action. Separate oversight, dispute and payment difficulty. A disputed invoice needs a different response from a forgotten one. Prioritise amount, age and collection prospects, without entering unconfirmed payment dates as certain.
Each month, review actual collections and new overdue amounts. Mercova helps assess the financial effect; legal collection proceedings remain with the appropriate professionals.
Key points
- Separate administrative delays, disputes and financial distress.
- A payment promise remains an assumption until the money arrives.
- DSO shows the overall collection period; invoice ageing guides individual actions.
- French payment rules do not automatically apply to Swiss contracts.
Frequently asked questions
Should every invoice follow the same reminder schedule?
No. Accepted invoices, disputes and financial distress need different responses. Timing should reflect the risk and replies received.
Does lower DSO mean we can afford to hire?
No. Check actual receipts, other commitments and future needs. DSO is an aggregate indicator.
Can a spreadsheet be sufficient?
Yes, with reliable data, assigned actions and consistent updates. Software choice depends on workload, integrations and time spent, with no universal threshold.
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