Boost Business Cash Flow with Effective Debtor Management

by Alexander Beard Group, on Jan 20, 2020 4:03:47 PM

A survey undertaken by an independent commercial finance company, found that of the 200 small businesses they surveyed, 56% have experienced cash flow concerns due to debtors paying late and a further 47% put their problems down to economic factors beyond their control.

Cash is the lifeblood of any business so taking control of debtors should be a fundamental part of your strategy, ensuring that you don’t end up in financial difficulty. Of course making a sale is fine, but collecting the cash is ultimately what matters. After all it’s cash that pays the bills, not profit.

Debtors are people or other businesses who owe money to your business. This will usually happen where you have sold products or services with a period of credit. The interim period of usually a month is when the individual or business is classed as a debtor.

Effective debtor management addresses the whole order to receipt cycle. We’ve put together five top tips around managing debtors and late payment.

  • Assess new customers: simple credit checks can make sure that potential new customers can pay their bills.
  • Look at existing customers: look for indicators; problems meeting payments, not returning phone calls; these may be indications of cash flow issues that could impact your business.
  • The importance of a credit policy: Having a written credit policy in place and up to date is a good way of preventing problems that may occur at a later date.
  • Manage invoices: Invoice accurately, clearly and promptly. Raise invoices as soon as the work is completed and don’t wait until the end of the month, which could result in the customer processing somebody else’s invoices in front of yours.
  • Maintain dialogue: Don’t be afraid to ask for payment. Telephone shortly after you send your invoice and progress the invoice. Monitor payment performance closely.
Overall having an efficient debt management process in place, will cut down time spent chasing bills in the longer-term.

If you want to chat through any of the issues highlighted above, contact one of the team who will be happy to help.