Negative Cash Flow
A study in the US found that 82% of small/medium size businesses fail due to cash related issues. According to “Bad Cashflow Management” only 1 in 5 businesses manage their cash flow effectively.
So how does this simple concept (cash in/cash out) seem to allude the business owner? Like everything in life it is not that simple. Firstly, most entrepreneurs and business owners have taken the plunge as they can offer a unique skill/service/product, let us call it their USP (unique selling point) and a majority of their time is promoting their business.
Unfortunately, it comes with the expectation that their clients will pay (on time) and that they have the internal structures within the business to manage it (usually they take it on personally).
They often do not take into account the type of business they offer e.g service or product or the types of clients they have on their books and how those clients manage their cashflow.
Seldom does it work for the person “selling” the product or service to be the one “asking” to be paid.
Positive Cash Flow
So how does it work?
- Debtor Solutions will recommend any changes that could be made to ease the cash flow situation i.e terms, deposits etc.
- An e-mail address dedicated to handling debtors will be set up either by your company or Debtor Solutions.
- Debtor Solutions helps you compile a letter to send to your clients informing them of the new person managing the debtors.
- Client ensures all receipts are up to date and entered on the accounting system. Client produces debtors list or if on a cloud based accounting package give access to Debtor Solutions.
- All the debtors are contacted.
- Client is given a report within 5 days on feedback from debtors as to when they are going to pay or with any queries.
- Queries must be resolved with the client within 24 hours and new invoice issued if necessary.
2nd month onwards Debtor Solutions will do the following
- Contact all overdue payments on a weekly basis.
- Send reminders for payments that are due shortly.
- Communicate all queries with client.
- Produce feedback on a weekly basis.
Just a couple of things to bear in mind:
- Your company needs to use a recognised accounting package.
- A monthly invoicing system must be in place.
- Someone is needed to assist in resolving debtor’s queries. When people don’t want to pay the first thing they query is the invoice, being able to get back to them timeously ensures that the invoice is paid quicker