Can you get customers to pay faster by shortening their terms?

The typical payment from a restaurant or retailer to their vendor is late. Our last data post compared the payment behavior to different types of vendors, showing that some vendors like meat distributors are paid more than 10 days slower than produce distributors: Why do restaurants & retailers pay some vendors faster than others? 

The size of the invoice was a factor in how quickly invoices are paid. This post explores two other factors that have a big impact on payment timing: payment terms and payment method. 

Impact of payment terms on behavior

The terms you set for customers have a big impact on how they pay, but it varies based on payment method. When we look at the behavior of a “typical” check payer, as long as the buyer has terms of at least 15 days, they are typically paying on time or even early. For invoices with terms of less than 15 days, they are usually paid late:

ACH payers are faster and pay more consistently with their terms, but are still late when they have terms of less than 14 days:

One major driver for the difference between check and ACH is the time it takes to send mail. The average time for the USPS to deliver mail in 2024 was 2.8 days (link), but that means a lot of mail takes even longer. With checks there can often be additional time to print checks and stuff envelopes. That’s not even considering the increased frequency of check theft and fraud which can further delay payments (link), 

By comparison, buyers that pay via Wholesail are more consistently on-time or early regardless of their terms:

What drives this?

Paying in less than 2 weeks is very difficult for any AP department. An invoice needs to make its way from delivery to the person responsible for paying the bills. This process often takes multiple steps. When the person who is responsible for paying the bills has it, there are often questions or other manual processing steps that are needed before payment is made. 

If you offer terms of less than 2 weeks it’s important to have an option that makes it more realistic for customers to meet their terms. Often vendors set up credit cards on file or have customers set up direct debit ACH to be charged on a weekly basis.

Wholesail has multiple options for buyers to pay faster or for vendors to enroll them in automated payments. As a result, Wholesail payments are much faster:

On average, buyers paying through Wholesail pay 10 days faster than check and 7 days faster than ACH. This is driven by a few key factors:

• Buyers can proactively access their account standing with automated, emailed statements and invoices and a 24/7 Customer Portal.
• The Customer Portal is always aligned with the vendor’s accounting system of record, so vendors and buyers are on the same page.  
• Buyers can pay with a couple clicks or choose to set-up Autopay. 53% of Wholesail payments are through Autopay, which means consistent, reliable payments within terms.

Next time you set terms less than 15 days, make sure you have tools in place to make it easy for your customers to pay or else you may be chasing late payments. 

Stay tuned as we continue to uncover insights that can help your business thrive in a competitive landscape. If you’re interested in personalized data or want to share your experiences, reach out to us at Wholesail.