Control Your Debtors

To calculate your debtor days, multiply your outstanding debtors at month end by 365 days and divide by your annual sales. As an example – a $400,000 turnover business with debtors of $50,000 will have debtor days of 45. If they were to reduce this to 30 days think what this would mean to their cashflow. And then consider the fact that up to 20% of the value of an overdue invoice can be lost to recovery costs. Follow these tips below for better cashflow management –

1. Make it easy to be paid. Statements should be clear with due dates and payment options visible. Send statements on a regular basis.

2.Follow up Debtors as a routine. Have a set day every week or fortnight for chasing debtors and follow religiously. Consistent approach with clear and friendly communication is the key to building a relationship.

3. Do not proceed with further work or shipment of goods until old debts are cleared.

4. Reduce errors – ensure you have the correct pricing and quantities on your invoices.

5. Customer Dashboards and Management Reports – ensure that your staff or bookkeeper are providing you with aged debtor reports and / or real time dashboards on your accounting software showing at a glance debtor days, outstanding invoices etc.