Being successful in business is predicated upon doing everything according to schedule. Whether it's paying rent on your office building, doling out wages to employees or delivering your product to consumers, being timely is important for keeping your company humming along without any complications.
Invoicing customers and collecting the cash you're owed in a timely fashion is crucial.
Debt collection absolutely must be a part of this. Invoicing customers and collecting the cash you're owed is crucial. Without this step, it becomes difficult to pay for all the other top priorities on your company's to-do list.
This brings us to a fundamental question - what's your target turn-around time for invoicing customers and collecting their payments? Is a 60-day billing cycle good enough for your purposes, or do you need to be even faster? It depends on the specific business goals you're looking to accomplish.
Doing what's best for your cash flow needs
If you're dealing with a good deal of unpaid invoices in your company's latest cash flow report, it's time to take a closer look at your procedure and see if you need to tighten things up. It's good to benchmark your approach against others that are common in your industry. According to the Australian Competition and Consumer Commission, it's typical for companies to give debtors 60 days, then report a default once they pass that deadline.
The common practice is that once an invoice passes that 60-day limit, definitive action is taken such as selling the debt away or handing the account off to a debt collection agency. Some companies are even tightening up on this restriction, taking action in 45 days or even 30.
What should your company do? It's hard to say - 60 days is only a general guideline, not a hard-and-fast rule. Your company's limits should depend on what specific cash flow needs you have and how quickly you need to meet them.
Enforcing the best timeframe for your business
Once you have a debt collection framework in place, how will you enforce it and guarantee continued cash flow? According to the American Express OPEN Forum, the key to this is communication - if you keep in touch with your customers and talk regularly about getting payments finalised, everything should be easier.
Small gestures like follow-up phone calls after the completion of a sale can go a long way. If you ignore your customers post-sale, they might ignore you too - which means they could easily forget to send in payments. If you have a communication routine, though, there should be fewer hiccups.
Some customers just need a quick email or a letter to remind them about paying up; with others, phone calls might work better since they're a way of having direct conversations and nailing down answers. Either way, the entire process is smoother if you have a plan you can stick to.
Getting financial help when you need it
Having reliable access to the cash you need is crucial for running a business from day to day. If you're worried that you might not have the funds you need, it makes sense to have a contingency plan in your back pocket. Fortunately, debtor finance can be that plan.
With debtor finance, you gain a way of improving the consistency of your cash flow. If you need money quickly to cover your pressing financial needs, just reach out, and your funds will be available within hours. Debtor finance is always reliable, regardless of whether your customers hold up their end of the deal.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].