Willingness to pay

Willingness to pay describes the degree to which a person or company is willing to pay their financial obligations - regardless of whether or not they have the ability to pay.

Whereas ability to pay is about the ability to pay, willingness to pay is about the intention to pay.

A customer can therefore have solid finances but a low willingness to pay, and conversely, a customer with limited finances can still have a high willingness to pay the amount owed.

Ability vs. willingness to pay

Although the two terms are often mentioned together, the difference is clear:

• Ability to pay = Can the customer pay?
• Willingness to pay = Will the customer pay?

A customer with a low willingness to pay may postpone or avoid payment altogether, even when funds are available. Conversely, a customer with a high willingness to pay will often prioritize paying on time - even when finances are tight.

Why is willingness to pay important?

For businesses, it's not enough to know a customer's ability to pay. Willingness to pay is just as crucial to whether the money actually comes in.

Lack of willingness to pay can lead to:

• Repeated reminders
• Late payments
• Increased risk of loss

That's why willingness to pay is often a key factor in credit scoring and ongoing debtor management.

How is willingness to pay assessed?

Willingness to pay is harder to measure than ability to pay, but an assessment can be made based on factors such as:

• Past payment history - does the customer typically pay on time?
• Behavior during reminder and debt collection processes
• Compliance with previous agreements, e.g. installment agreements
• Any disputes or complaints that may indicate low willingness to pay

An overall assessment therefore requires both financial data and insight into customer behavior.

Willingness to pay as a strategic parameter

Companies that systematically assess customers' willingness to pay can do better:

• Prevent losses
• Optimize credit and payment terms
• Strengthen customer relationships through better risk management

In this way, willingness to pay becomes not just a legal or financial concept, but a strategic tool in credit and debtor management.