5 tips to help you manage your receivables

Paid stamp5 tips to help you manage your receivables

Cash is the lifeblood of every successful business. A business may experience poor cash flow for many reasons, but one of the most common is poor debtor management. It is important to make sales, but those sales mean little if you don’t get paid in the end.

These five tips will improve your debtor management so you can turn invoices into money in the bank. 1. Be careful about who you give credit to Do your homework on new customers. Is it a successful, long established business? Who runs it? What’s their reputation? Credit checks are generally inexpensive and often worthwhile, especially if orders are large. If you are doubtful about their ability to settle their bill, insist on cash sales only or only offer a small credit limit. 2. Invoice your customers immediately If you do not invoice on time you cannot expect to be paid on time. This also ensures your invoice is processed by the customer as soon as possible, reducing the likelihood of other people’s invoices being processed before yours. 3. Define and confirm terms with the customer from the outset Such as the length of credit period and their credit limit. Ensure the customer understands and ask for a written confirmation. This will avoid confusion during a dispute. 4. Monitor your debtors regularly An ‘aged debtors analysis’ report is a popular tool for doing this. Following up on overdue debtors is critical. Ensure the invoice has been received and there are no queries. Solve any queries as soon as possible to ensure payment will not be further delayed. Don’t be afraid to call and ask for payment when it is due. 5. Provide an incentive for prompt payment Common strategies include discounts for early payment, discounts for cash sales and interest charged on late payments. Poor debtor management plagues many businesses, despite the fact that it can be improved with relatively simple, easy to use steps. Many go bankrupt due to poor cash flow, and their inability to turn debtors into cash is often one of the main contributors to this. By putting simple controls in place, you can help ensure dealing with your credit customers is a smooth, painless process. Colour Accounting™ is our financial literacy course. Click here to secure your place. [traininglist slug=”colour-accounting-normal”]]]>

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