Two words: debtor control.
Do you know what the cheapest funding available to your business is? You guessed it – debtor control. While the topic may not be exciting or glamorous, it’s something that every business owner should be thinking about. And what better time to polish up on your own debtor practises than a shiny new year!
What is it?
Debtor control is the process of ensuring you are paid for your products & services on time. Having a good handle on your business’s receivables is the cheapest funding available to any business, and yet 3 in 5 small business owners are dealing with late payment issues.
Debtor control is critical to ensuring your business has sufficient working capital to reinvest and grow. If you are waiting for overdue invoices to be paid, you are forgoing using that money on your business. We see many small businesses taking out loans to cover operational costs while they are waiting for their clients to pay overdue accounts. This means that you, the business owner, need to take out finance – which costs your business money in the form of interest payments – all because your clients haven’t paid their accounts in a timely manner. As you can see, having control over your debtors is the cheapest funding available to any business!
How can I improve?
Let’s get into some ways in which Aussie small businesses can ensure they are operating their business with excellent debtor management.
- What payment terms work for YOUR business? A lot of small businesses do not put any thought into what their ideal payment terms are – rather they simply follow the industry standards. Why not ask for payment the day of job completion rather than 30 days later?
- Ensure your clients understand your payment terms. All associated business documentation like contracts, invoices, estimates and quotes should clearly articulate your credit policy to minimise any misunderstandings and ensure your clients are aware of the terms.
- Fine tune your process. The process for ensuring your invoices are paid on time should be clearly understood by staff. We recommend mapping out the timing of various communications such as letters, emails and calls to ensure a standard and reliable process is followed every single time. Consistency is key.
- Always conduct credit checks. Why put your business into unnecessarily risky situations? Credit checks for your customers or potential customers should be carried out routinely to identify any potential issues.
- Finance solutions. Did you know that there are financial solutions out there designed to specifically help SME owners with their debtors? At Funda, we have a product called Better CashFlow, it helps businesses get their outstanding accounts paid faster, improves cash flow, and saves the business time. Because we understand that as a small to medium business owner, having thousands of dollars out of reach in the form of unpaid invoices can put some serious strains on your business’s opportunity to operate and grow.
Chat with Funda
If you would like some extra funding to assist with cash flow pressures, or are interested in chatting about how our Better CashFlow product could improve your business’s bottom line, simply leave us a message here, or give one of our team a call on 1300 647 996.
So, what changes will you be making in your business in 2019?