To follow on from last weeks topic where we asked, “why are you acting like a Bank?”, let’s talk about Debtors. It’s a serious issue for any service based business, so much so that there is an entire industry and software platforms, dedicated to reducing the impact this has on businesses of all shapes and sizes.
In our humble opinion, it’s easy! Just pick up the phone and call your clients. Just do it. Stop being afraid of them getting annoyed at you. They owe you money. You provided the service, you completed the work and they now owe you money. Just pick up the phone and call your clients.
Did you know that the cost of your aged debtors is like taking out a business loan? If you had $200k worth of aged debtors, likening this to a 5% commercial business loan, that’s a cost of $10,000 p.a. to fund these debtors.
Add to that the cost of your admin, finance manager or even your time chasing up these debtors. A cost that isn’t being used for revenue generating work! That’s money you could be using to increase YOUR cash flow and PROFIT!
There are so many options available to help easily collect overdue invoices, such as software solutions allowing for payments enabled prior to beginning work, like Practice Ignition or turning on reminders through Xero, Debtor Daddy or Chaser just to name a few.
Ultimately though, picking up the phone and calling a client, rarely ends in a negative outcome, your client has usually forgotten or is embarrassed, which opens the door to have a positive discussion about their financial situation….exactly the service that you should be providing as an Accountant!
In the next blog, we’re going to talk about, why you are not a Post Office....want to know more? Get in touch for a chat!
Clarity Street was conceived from years of engaging with Accounting firms on a daily basis and a constant desire to make Accounting firms & SME’s more efficient and profitable.