Strategies for Reducing Debtor Days

[02.10.21]

Robust cashflow is essential to ensure the viability and vitality of a business.

Cashflow improvement starts at the customer enquiry stage. Credit checking is very useful to ensure that you only offer credit to customers who pay on time.  Those who are non-paying or slow-paying customers should be put onto cash-only accounts and required to pay in advance before work starts or goods are dispatched.

Setting out your terms and conditions, including payment terms is vital. In addition include your payment terms on all invoices.  This ensures that your customer is aware of your expectations of payment terms.

When you send your invoice, ensure that you include all necessary documentation, authorisation, and purchase order numbers. This reduces the chances for errors or delays and can mean quicker payments. If possible have a chat with the customer’s accounts department to find out when they make their regular payment runs, enabling you to manage your cashflow.

On larger orders it may be worth a courtesy call before payment is due to ensure that everything is in order, the customer is satisfied with the goods or services, and that they have everything they need to make the payment. This allows you to resolve any discrepancies early.

Send invoices immediately and automate reminders.  Prompt invoicing is the start of the payment process. If you are performing a service at a client’s premises, use phone apps to raise invoices before leaving the site. You can use a card reader to take payment on site too. Use recurring invoices and other automation where possible.

Your credit control process should include early and frequent chasing. Automating this process will save time and ensures that the chasing happens. Ensure that you reconcile the bank frequently so that all payments received are matched to invoices promptly and you don’t chase invoices that have already been paid.

If you have any queries regarding reducing your debtor days, please contact Jackie or Andrew.

Castletons Accountants

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