How to Reduce the Risk of Increasing Debtor Days
Most individuals within a business believe that reducing debtor days falls to the finance team. It is one of the biggest headaches for CFOs!
Most employees believe it is the finance team's responsibility and not theirs!
WRONG!
Everyone within a business needs to be focused on reducing debtor days (i.e., the people who owe the business money).
Every day that passes, with “your money” for services or goods sitting with your client for an unpaid invoice, costs your business more money. Financing costs at any scale can and do have a negative impact on your growth and starve your business of cash.
So what can you do to overcome this?
There are a number of actions you can take to improve your overall cash flow and reduce your debtor days.
- Decrease the time elapsed between work completed and bill delivery
Decreasing the time elapsed from when the service is delivered to when the invoice goes to your customer can greatly speed up cash collection.
- Agree better payment terms with your clients.
All clients will push for better payment terms (just like you could be pushing with your suppliers). It’s important to understand what is fair and reasonable and to confidently communicate that with your clients.
- Reduce errors on invoices.
This really comes down to your financial systems and processes. Always ensure that the correct details are in the invoice in terms of company details, banking information, and most importantly, clarity and accuracy of the services/products provided. Missing key details provide the perfect opportunity for some customers to delay payments.
The critical aspect that underpins this lever from the 7 Levers for Rapid Business Growth and Increased Business Valuation is how well your systems and processes are orchestrated and designed to support your business outcomes.
Paying attention to these processes and ensuring the systems are set up to support your business and maximise your cash-flow is a great start to your business success and ultimately business growth.
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We work with large-scale clients who wish to transform and optimise their businesses for growth and value creation. A combination of our cost optimisation services and tech-enabled business design solutions yields outstanding results. Book a call with us to talk through the opportunities.
Why not download the full article and read up on the 7 Levers for Rapid Business Growth and Increased Business Valuation article?
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