Late payments. Two words that can strangle your cash flow and tie up staff in the unwanted task of working the phones to chase unpaid invoices (phone tag anyone?).
Data backs this up, of course.
ezyCollect is a leading accounts receivable software company, and our research for MYOB indicates businesses can’t escape having to remind customers to pay. *
In fact, 59 percent of overdue invoices require three or more follow ups before they’re settled, so reminders help to recover cash.
But at what cost?
After examining the 213,000 invoices we manage for MYOB EXO clients, we found that 49.6 percent of those invoices typically become overdue, with businesses incurring huge costs.
To summarise, these can be:
But here’s the good news. MYOB EXO clients using ezyCollect collect on average around $30,000 a day.
Our software recognises unpaid invoices, and then sends out automated reminders to collect payment.
Here’s what the stats show:
While there’s no escaping the need to remind customers to pay, it’s possible to ease the burden of communicating with overdue debtors and get your invoices paid sooner.
These essential prompt payment principles can quickly improve cash flow and establish a prompt payments culture.
Any business issuing trade credit should have a systematic process to track outstanding invoices and debtors so it never loses track of money that’s owing.
This process should include:
While it’s possible to do debtor management tasks manually, automation allows skilled staff to get on with more valuable jobs that are competing for their time and attention.
In terms of efficiency and reliability, automation leads to discipline and control.
Setting some accounts receivable goals is a fantastic way to put the spotlight on cash flow and helps businesses narrow in on getting paid faster.
There are many accounting formulas that help here, but a simple one is Days Sales Outstanding.
Use it to calculate the average collection time in days, then determine what needs to change so debtor days reduce.
Day-to-day, business operators should have the following data at their fingertips:
Just as a customer-friendly business will reap rewards, so will a debtor-friendly business.
Make it easy for debtors to make a payment.
If a debtor needs to pull out a cheque book or phone in to make a payment by credit card, expect delays.
Debtor friendly businesses:
Cracking the debtor management code is easier than you think. Unlocking the cash also frees you up to unlock your potential.
What could your business achieve with more time and cash?
*MYOB EXO clients using ezyCollect for automated credit management.