An important part of any business is knowing who owes you money and how much. Speaking with Steve Priddle, Bookkeeping Manager at Ross Group, he’s seen a lot of businesses unnecessarily suffer because they haven’t paid enough attention to their debtors. Steve strongly believes businesses need to have processes around payment terms, procedures for collections, and make sure they are strictly adhered to when it comes to managing debtors.
We have seen a common theme, particularly with tradies in business, who give credit to customers they may be dealing with for the first time. We understand why they do it, in their attempt to secure the job, and start building what they hope will be a long term relationship. Though our advice is to discuss payment terms and obtain personal details from the outset. Contrary to common belief, this is not off putting to potential customers, but gives them confidence and is reflective of the professional business that you’re operating.
It’s interesting when you think about it, to actually secure a line of credit (with a broker or a bank) you have to jump through hoops… yet we see clients giving credit to potential strangers! Failing to secure customer details puts your business at risk, you have to ask yourself; What’s the point of securing a job if there’s potential NOT to be paid? The answer is; there’s NO point.
We find that businesses who use Xero (accounting software) to create invoices, are able to assess their debtors at a glance. Using Xero’s system will highlight any accounts outside payment/trading terms, and has the ability to email statements to clients at the push of a button.
These reminders or statements are the type of events that should be included in your standard operating procedures (SOP’s), as you follow a process to ensure uniform practice across all of your customers/suppliers. You can also set up “rules” in Xero that will automatically generate reminders for payment, and take the pressure off you trying to remember the status of your debtors.
We also recommend you build into your procedure contact by phone. It’s really important to display your ‘personal touch’, and a contact-in-person can help you address any invoicing discrepancies as you take a solutions focus into discussions and solve problems before they drag out. A phone call reminder (with the capacity to take payment over the phone) will generally address the majority of your debtors, as most people just forget their due date, there’s no malice in it… just no memory!
The days of relying on “heavies” to help manage your debtors are long gone. You can use software (like Xero) and develop processes around payment terms, procedures for collections, and stick to them to ensure managing your debtors is as simple as it can be. You can contact Steve Priddle, to talk more about Xero, Bookkeeping and advice on debtor management.
Contributed by Mel Ross with Steve Priddle.
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