Uncollectible is one of the four-letter words in Account Receivables that no one really wants to talk about. It’s better to focus on the late payers than the non-payers because, let’s face it, it’s depressing. But there’s good news!
In the U.S., according to a recent survey of all sizes and industries, the total value of uncollectable invoices is only 2.2% in the Americas and 1.2% in Europe.
Let's break this down by industry categories focusing on the Americas. Manufacturing uncollectibles is at 2.5% of total accounts receivable value. Wholesale, Retail, and Distribution are at 2.3%. Services drop down to 1.8%!
Another breakdown on the same study of uncollectable account receivables is by business size. If you’re a micro-enterprise, you’re in luck. Micro-businesses report only 1.6% of uncollectable invoice value in their account receivables. SMEs and large companies both report at 2.4%.
Of course, any number above 0% stinks. So, how can we lower that? First, using smart invoice software can help you to send automatic reminders that follow up with your clients so you don’t have to. Credit scoring is another great way to keep track of how on time your clients are in real time. None of that sending out to the credit reporting agency and waiting for them to get back to you.
Where do you fit in on this scale? Hopefully, lower than the average shows, but if not, there are several great ways to encourage your customers to pay on time.