Last editedApr 20222 min read
Within business, payment delay refers to the number of days a company waits between receiving a bill and paying it. Late payments, on the other hand, specifically refer to payments that have not been made by the due date and are therefore overdue.
While lengthy periods of delay can be a cause for annoyance when waiting for invoices to be paid, they can actually help prevent payment errors. This is because the delay is often used to double check bills, invoices and/or payment information.
In this post, we’ll explain what payment delays are and how you can go about dealing with them.
Delayed payment definition
As stated above, payment delay is the period of time a business or institution waits between receiving a bill and paying it. They may have a longer delay because they wish to carry out checks on the bill before parting with the sum due, or because they want to wait until a more financially opportune payment to pay it.
How to deal with delayed payments
Delayed payments can have a negative effect on cash flow and you may find yourself out of pocket while waiting for the payment to arrive. However, there are a number of ways you can prevent and/or tackle delayed payments:
Find out in advance how long you expect a payment delay to be. That way you can plan your cash flow projections around it instead of finding yourself in financial difficulty when the payment doesn’t arrive when you expected it to.
Consider sending invoices and bills earlier than you typically would so that you will receive payment in good time.
Ensure all necessary information is included on the invoice or bill, and that it is all correct. This will prevent any additional checks being carried out which may extend delays.
Make sure you retain all relevant contracts, payment agreements and invoices in case the payment ends up being overdue.
Use GoCardless to help you get paid promptly. GoCardless can help you get paid on time as it allows merchants to directly pull payments from their clients’ bank accounts, effectively eliminating late payments and the cash flow issues that follow.
In fact, according to a 2021 study conducted by Attest, GoCardless customers have 51% fewer incorrect payments compared to those who receive payments from clients in the traditional way, and they get paid 47% faster. This leads to significantly lower stress levels and a decrease in debtor days (ratio measuring how quickly cash is collected from debtors).
Delayed payment in online banking
You may also encounter delayed payments when issuing online payments with your bank.
Most online banking payments are processed without delay. However, if a payment seems unusual in any way, i.e., is of an unusually high amount or is being sent to a new recipient overseas, the bank may increase the payment in order to investigate further.
This essentially means your payment is going through some extra security checks in order to be authenticated. While this may be inconvenient with intentional payments, it can be hugely beneficial in the case that the payment is indeed fraudulent or suspect.
If the bank determines that your payment is not valid, they will return the funds to you and the code ‘REJ’ or ‘RET’ plus 4-8 digits will show up on your statement.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.