Missed Payment Deadlines? Here’s How to Ensure Timely Invoice Payments

The authors aren’t impressed. Payment practices in Danish ministries fall short when it comes to meeting payment deadlines and honoring agreements with private suppliers.

In December, Rigsrevisionen published a report (in danish) revealing that 11% of invoices from private suppliers to Danish ministries were paid late in 2023. This translates to 139,238 invoices and a total amount of 8.8 billion DKK.

Late payments burden suppliers with extra administration and potential liquidity issues. They also cost the state unnecessary expenses in interest and fees. In 2023 alone, these costs amounted to 4.3 million DKK, all of which could have been avoided.

Late invoice payments aren’t exclusive to Danish ministries. They’re a widespread challenge whenever buyers and sellers settle accounts. However, based on the report’s findings, this blog post focuses on state institutions.

This naturally raises the question:

Why do Danish ministries struggle to pay on time, and how can this issue be resolved?

Reasons to Why Invoices Aren’t Paid on Time?

With over 25 years of experience in managing invoices, we’ve identified numerous reasons for delayed invoice payments.

These include missing references, poor approval processes leaving no one accountable, misplaced data, internal bottlenecks, conflicting invoice details, long communication chains, incorrect due dates, and many more.

The report highlights similar issues, such as:

• Invoice verification: Significant time is spent checking case numbers, project numbers, addresses, approvers, PO numbers, or ensuring that delivered goods match orders.
• Incomplete or incorrect invoice information: Suppliers sometimes forget to include essential details or make outright errors, requiring time-consuming communication to resolve.
• Administrative bottlenecks: Internal workflows, such as staff reassignments, layoffs, or busy periods, can delay processing times.
• Unclear responsibilities: If no one knows who should approve or handle an invoice, it can sit idle in the system.
• Technical issues: Technical challenges, like those experienced by Denmark’s Ministry of Digitalization, can disrupt invoice processing.

The Consequences of Late Payments

Late payments have consequences for both the buyer (e.g., ministries or companies) and the supplier.

Late payments can lead to unnecessary costs for buyers, such as reminders or interest fees. Repeated delays can damage a company’s reputation, and for public institutions, they can tarnish their role-model status.

Late payments can cause liquidity problems for suppliers, potentially disrupting operations or supply chains. Smaller suppliers are particularly vulnerable. Additionally, chasing overdue payments consumes resources, distracting suppliers from their core business.

Improved Processes and Technology is The Way Forward

While this blog focuses on state institutions, the solutions we propose apply to organizations of all sizes, public or private.

Technology is your ally—especially for manual verification tasks like checking approvers or delivery addresses. Automating these processes saves time and reduces errors.

Errors in invoices are another common challenge, as highlighted by both the report and our own experience. It’s not unusual for an invoice to sit unchecked for two weeks during peak periods, such as holidays or when staff are ill. Then, back-and-forth communication with suppliers is required to issue credit notes or revised invoices. Before you know it, the payment deadline is looming. Here, too, technology can step in.

Our solution, InvoiceFirewall, automatically verifies invoices upon arrival. If errors are detected, the system notifies the supplier with a link for quick corrections. In cases where our intelligent AI software can fix the issue, it does so without bothering either party. This ensures invoices are ready for full automation within the company’s workflow or ERP system. In this case, the likelihood of on-time payment increases significantly, as ministries can verify the invoice immediately before forwarding it to the state administration.

By investing in better processes and technology, organizations can not only improve payment practices but also strengthen trust with their partners.

Use Costs More Effectively

Let’s be clear: 4.3 million DKK won’t break the state’s finances. But why waste money on avoidable expenses?

The same logic applies to private companies. Large corporations can incur substantial costs from missed deadlines—costs that can be avoided by investing in technology to streamline and automate invoice processes.

Whether you’re a public institution or a private business, prioritizing timely invoice payments benefits everyone.

Author

Anders, our Sales Director, has his finger on the pulse of all the challenges organizations face related to invoice processing.