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Cashflow - Who's in control?

ABN Latest News

Often when talking to a business, cash flow is a major concern. However, when investigated some of the problems actually lie with the business systems / policies rather than the debtor / client paying.

Here are our top seven list of things we hear about debtors:

  1. We don’t have the time to follow up accounts
  2. They always pay in xx days so we know we are going to get the money it is just outside our terms
  3. They are experiencing problems at the moment but will pay when they have resolved their issues
  4. The amount is in dispute and we have to resolve an issue before we get paid
  5. They are a friend, I know they are good for it
  6. We are looking to discount this amount in order to get paid
  7. They haven’t got paid from their contract yet but once they do we will be paid

 
Majority of these can be addressed by policies and procedures whilst others need to be given a higher priority.

Our favourite is the first one, we are too busy to follow up accounts. If you keep doing more work and don’t get paid promptly it is only going to make the cash situation worse. It needs to be made a priority to make sure that the capital of the business is increasing. There are now automated systems that integrate with cloud accounting packages (such as Xero) to remove the time requirement from this task.

The same applies to situations where there is something that needs to happen to fix a dispute in order to get paid. Again this is a top priority task. You have already paid the labour / materials to complete the job you need to be remunerated as soon as possible so you are not left out of pocket any longer than required.

The point we would make about the others is remember one thing – It is your business, you set the rules. If you set terms and allow people to pay outside those terms without hearing from you, you are basically letting them know that it is acceptable.

If you have been guilty of using one of the seven in your business, get some helpful hints from ABN’s Bookkeepers Knowledge Base Edition 52: Managing Your Debtors.

Category
ABN
Published
11 Nov 2014
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