Cash Flow and Debtor Management Strategies
Average debtor days have moved out significantly in the last 10 years. Having Invoices outstanding means your bank account is starving which causes your business to experience a "Cash Flow Gap". Business, now more than ever, have to be prudent in managing their Accounts Receivable.
Some examples to help manage the ageing receivable book would include:
- Sending out Invoices straight after delivery of product and service
- Following up and getting acknowledgement of receipt of Invoice
- Stating clearly the terms offered (if any)
- Sending statements at the end of each month (consider also sending Statements on the 15th of each month)
- Following up on overdue invoices telepathically the very day it goes overdue
- For all new clients: Consider implementing a formal new account application process where new clients apply for terms and sign a terms and conditions for your business.
- Having effective accounting software in place to manage your Accounts Receivable is key.
A business may also employ Invoice Financing as a method of finance to effectively accelerate outstanding Invoices. Should the business find that some of its clients demand a 30, 60 or even 90 day payment term, those Invoices can be presented for advance payment where typically 80% of the Invoice value can be accelerated.