Late payments often get fought with more reminders, while the underlying cause stays untouched. Root Cause Analysis of Late Payments argues for a different approach.
Why more reminders don't solve the problem
If a customer consistently pays late due to an internal approval bottleneck or a dispute over the invoice, an extra reminder changes nothing. More pressure on the symptom doesn't fix the underlying problem — and can even strain the relationship further without addressing the real issue.
The most common structural causes
Recurring causes of delay include: unclear or incorrect invoices held internally by the customer for correction, lengthy internal approval processes at the customer, unresolved disputes over delivery or quality, and structural liquidity pressure at the customer itself. Each cause requires a fundamentally different intervention than a standard reminder.
How root cause analysis works in practice
Root cause analysis starts by categorizing every overdue invoice by cause, not just by age. Over time a pattern emerges: perhaps 40% of delay turns out to trace back to invoicing errors, pointing to an internal process that needs fixing, not unwilling customers.
Practical: identifying and addressing structural problems
Root cause analysis requires a structured process rather than isolated observations.
- categorize every overdue invoice by underlying cause, not just by age.
- analyze periodically which cause occurs most often within the portfolio.
- feed invoicing errors back to the invoicing process, not just to the individual customer.
- treat disputes as a separate workflow with its own ownership and turnaround time.
- measure the effect of process improvements on average delay over time.
What CreditCraft adds
CreditCraft helps identify structural causes of late payments, so improvements target the process instead of endlessly repeated reminders.
Conclusion
Stop fighting symptoms and tackle the real causes of late payments: root cause analysis often reveals that internal processes contribute more to delay than unwilling customers.