Improve Debt Collection

Vaughan gave a small business presentation to small businesses last Thursday.  He’s attached the following as a means to improve debtor collections:

1. Develop regular processes:
1. Accurate cash flow depends upon having the right information.
2. Develop some worthwhile housekeeping rules for your company.
3. Ensure that you as the owner, make sure that all your staff are productive.
4. Keep a weekly eye on productivity ratios and set budgets, so at a glance you can see whether people are keeping to their budgeted ratios.
5. When a job is complete, invoice it there and then, don’t hang around till month end and say I’ll do it then.
6. Offer a prompt payment discount – say 5% if paid within 5 days.
   
   
2. An apple a day:
1. The best way to manage cash flow is to spend some time on it each day.
2. As a small business owner, each morning I open Xero and see who has paid me.
3. I then compare the payments received, against the expected cash flow we had budgeted for on the previous Friday.
4. Use Microsoft Outlook or some other electronic diary that warns you when you have a payment coming up.
   
   
3. Look at your creditors:
1. Many companies are so focused on inwards cash, that they forget all about their creditors.
2. We know that managing debtors is vital, but managing creditors is just as vital.
   
   
4. Talk to your suppliers:
1. You can take discounts, avoid late payment penalties, and negotiate for better terms with creditors whom you spend a lot of money with.
   
   
5. On-line accounting tools:
1. Excellent way of managing your investment.
2. We add all our clients to Xero now because it gives them so much more flexibility.
3. It allows you as the business owner, to develop tools such as real time forecasting.
4. You can be on the move and once you have access to your Smart Phone or a PC, you can look at your sales versus cash actually coming into the bank.

 The slide of the day was “Have short payment terms and enforce them. We use 7 days. We are serious about the work that we perform, so we can be serious about collecting payment.”  Jochen Daum