Growing sales can disguise a worsening customer payment pattern
Use comparable invoice cohorts to distinguish sales growth from deteriorating payment behaviour in a large customer account.
Corporate Recovery Partners
01 / 06
The overdue total doubles with sales
Suppose a customer's monthly purchases have grown substantially and its overdue balance has also increased. Management concludes that payment behaviour has deteriorated, while the salesperson argues the increase merely reflects more business.
Neither conclusion follows from the total alone. Compare similar groups of invoices to understand how payment timing changed as the account grew.
Group invoices by a relevant period and similar agreed terms. Compare the proportion paid by comparable points after their due dates, keeping the method simple enough for the team to explain.
Do not mix invoices that are not yet due with older overdue items. Changes to payment terms, job mix or billing patterns can make two periods look different even when the customer's behaviour is unchanged.
Reconcile receipts, credits and corrections before calculating the comparison. A payment posted to the wrong invoice can make one group look slow and another unusually prompt.
Keep disputed amounts identifiable. The payment timing of an uncontested invoice may answer a different question from the timing of an amount still under active review.
Look for consistent movements across several comparable periods rather than relying on a single small group. State when there are too few invoices or too many unusual events for a confident conclusion.
business.gov.au's payment-terms guidance discusses managing credit and payment expectations. A clear account history helps inform that review without turning one reporting measure into a guarantee of future payment.
If comparable invoices are taking longer, ask the customer about the specific change and review the exposure created by new orders. If timing is stable but volume has risen, assess whether the larger funding requirement still suits the business.
Avoid changing contractual terms unilaterally on the basis of a spreadsheet. Use the evidence to support an appropriate commercial conversation and seek advice where needed.
Take two suitable invoice groups from a major account and document the selection, payment results and known exceptions. Show both the total outstanding and the timing pattern.
That gives the customer review a stronger basis. The business can distinguish a bigger account from a slower account and decide what each means for cash and future work.
