Tips on managing debtors

Recognise problems. Be aware of potential problems and take action immediately. Only use a solicitor as the last resort as the legal bill may end up costing you more than the amount owed.

Check administrative details. Ensure that invoices are correctly addressed, relate to the goods delivered and include order numbers if required. Conduct regular checks to ensure that all details are up-to-date and accurate. Also ensure the invoice is clearly addressed to the right contact person.

Invoice on time. Send out invoices as soon as possible. If you don’t, you can’t expect to be paid on time. Send out statements monthly. Don’t wait until the end of the month if you can send invoices at the same time you send the goods or deliver a service.

Credit control. Follow up overdue accounts by telephone. Keeping on top of regular and up-to-date communication with your clients and suppliers is key to credit control. Check customers have received invoices and that there are no queries. Deal with the same person each time you contact the company and make the largest outstanding debts your priority. Smart Seating’s Kurt Jones explains: “We have one person responsible for collection of debtors and we also make sure we know who is responsible for payment and we deal directly with them.”

Keep accurate records. Keep clear documentation and have a good filing system in place. The sales ledger must record all sales, credit notes issued, and adjustments to accounts. Invoices and payments should be entered as soon as they are issued or received.

Talking stock. Constantly manage your stock levels by ensuring you keep records and plan ahead because holding stock costs you money. One option is to speak to your current suppliers about more frequent deliveries so stock levels can be kept at a minimum.

Supply chain. When it comes to managing your suppliers, negotiate the best deal possible. You could get a better deal if you shop around and negotiate longer credit terms and volume discounts. This will spare cash to reinvest into your business.

Consider your finance options. Look into the expertise and experience of a business finance organisation that has the systems and resources to help improve your cash flow. One option is factoring, which turns up to 80 percent of the value of each sales invoice into cash within 24 hours. The finance organisation then collects the outstanding payments on behalf of their clients through an effective sales ledger management service.

Smart Seating uses debtor finance from Bibby Financial Services as a way to free up its working capital. Kurt Jones explains: “Obviously this significantly reduces the number of days between invoice and receipt of cash. In turn this cash is used to manage our creditors, which is the other half of the equation.”

Charlwood says a growing number of companies are turning to debtor finance for managing outstanding invoices. “Collecting outstanding payments can be time-consuming. Not only does debtor finance increase cash flow overnight, it frees up valuable management time, which can be focused on moving the business forward,” he says.

“These tips may seem obvious on reflection, but many companies get bogged down and forget to apply these simple rules. You may have won the order, but getting paid is just as important.” 

* For more information on managing outstanding invoices through debtor finance, visit www.bibby.com.au