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Cash Flow Checklist

Cash Flow Checklist

When the holidays are over and we return to work, one of the first things we need to get on top of is the status of our accounts receivable.

Whether you’ve been really busy or closed over the holidays, this will inevitably be on your ‘to do’ list.

For many businesses, getting through the holidays and keeping the bank balance positive has taken some work. Some won’t have been so fortunate and need to collect their unpaid invoices … yesterday!

Then there’s the businesses who have been so busy over the holidays that they need to catch up on their invoicing and administration. Sales have been great, however now the cash needs to be collected.

Cash Flow Checklist

Here’s a handy checklist to run through in the new year, to assist in prioritising the tasks when you’re working on your cash flow.

1. Ensure orders are completed & invoiced promptly

Firstly, invoice for the orders that have been completed. Make sure any orders that have not yet been fulfilled are completed promptly, so you can invoice for these also.

2. Ensure Invoice Queries Are Resolved

Get onto any invoices queries straight away, the sooner they can be authorised, the sooner they will be paid.

3. Follow Up Outstanding Invoices

Start contacting your overdue customers. You will soon get a handle on who is back at work, so be first in best dressed, and have your invoices pushed to the top of the pile for payment.

4. Send Reminders

Send customers advance reminders of when payments are due.

5. Can your sales team assist you?

For many industries, January can be the time when the sales team are encouraged to take annual leave. Can any of your sales team who are back at work assist with chasing up overdue accounts for you? These colleagues may have some good relationships that they can reach out to, and assist in getting a commitment to pay.

6. Can you assist the sales team?

It may be really useful to assist the sales team in generating new sales at this time of year. They may be grateful for a list of historical sales by customer from you to see which customers were ordering last year.

7. Review your credit limits

Are there any customers who have reached their credit limit with you? Think about whether you need to review these and ask for payment up front or a deposit invoice instead of extending further credit.

8. Make It Really Easy For Customers To Pay

Have all payment options on the face of your invoices, and think about what an early settlement discount could do for your cash flow if you offered it for payment before the end of January.

We Can Help

Remember, when we chase your customers for payment, we ask them to pay you directly, meaning your bank balance gets an immediate boost.

If you need a hand chasing up unpaid accounts, send them to us as soon as you can, so we can work on them for you.

Let’s follow up those slow payers and get your cash flow flowing again! Call us on 03 9629 8777.

Healthy cash flow

heathy cash flow

We’re well into the new financial year now, and many businesses would have reviewed their debt recovery processes and procedures, to ensure they maintain a healthy cash flow and minimise potential bad debts this year.

When we are winning new business, it’s great for our P&Ls, however if we don’t follow up on our invoices and get paid, it’s not great for our cash flow.

Do you need to review your credit terms or invoice frequency?

You may have standard credit terms that you offer your customers e.g. 30 days, however do your customers pay in line with these?  Does the payment cycle work for the cash flow of your business?

It may be that you could think about having shorter terms, so that you are paid more quickly.

Similarly, you may wish to look at how frequently you invoice. If you invoice monthly, what would be the impact to your cash flow if you invoiced weekly?

The sooner you invoice, the sooner you will be paid.

Follow up your sales invoices

Follow up your customers by calling them to confirm delivery or satisfaction with the goods or services you have provided.

If there are any reasons that could give rise to a dispute, find out early and not when payment is overdue. The sooner you resolve any issues, the sooner you will be paid.

Stay close to your customers, give them no reason not to like you. Just like people buy from people they like, they pay the people they like.

And remember, those who shout loudest get paid first!

Do you need to review your terms of trade?

Do you have a clause in your terms & conditions that will allow you to recover your debt recovery costs back from your debtor in the event that they do not pay?

If you do incur costs, you want peace of mind that you can recover these as well as the debt.

There are many clauses that can assist in the speedy recovery of your debts, and help maintain a healthy cash flow. Read more here on the benefits of having customised terms and conditions for your business.

Don’t give up on unpaid debts – lodge a credit default

Some debtors are stubborn, to put it kindly, and simply refuse to pay their accounts.
So what should you do if you have unpaid debts and all your efforts are falling on deaf ears?

Unless they are disputing the debt, we recommend lodging a default on the debtor’s credit rating. Why? You want to ensure that your unpaid debts are not going unheeded and that there will be some pain and consequences for not paying.

The benefits of lodging a credit default include:

· knowing that a default will stay on the debtor’s credit file for five years.
· hurting their ability to gain credit with other suppliers and financiers.
· demonstrating to others that you have had an issue and raising a red flag for those who may be considering extending credit to them.
On a positive note, too, we see more payments being finalised once a default has been lodged.

What to expect

You may be thinking: Won’t that client dump us if we lodge a credit default? Yes, that is more than likely, but remember that you don’t need clients who don’t pay their bills. This is especially true if it is not an ongoing client and there is no relationship to salvage – it’s just about getting paid.
In the case of a longstanding client it is quite often possible for us to identify problems in advance and resolve issues around why they are not paying on time (or at all). Properly handled, this process can strengthen a potentially toxic relationship.
Once a credit default has been lodged, you will find that some debtors pay immediately in order for the default to be marked as paid, while others will contact you down the track when they need the default marked as paid. The latter typically happens when they are having trouble gaining credit elsewhere. Your debtor may approach you at any time in the five-year period following lodgement.

How it works

Certain conditions must be met before a credit default can be lodged and our debt recovery process ensures these are ticked before we lodge on your behalf.
The real message is simple – don’t close the file on unpaid debts. If you’ve had unpaid debts, before giving up ask us about lodging a default.
It is often a good way to prod tardy payers – and ensure that you get your money.

Chasing for payment? Recognise these characters?

‘Our Favourites’

We all love our customers who pay to terms, we don’t need to remind them, payment comes through before or on the due date and we all want more of these customers, these are our favourites.

‘The Busy Guys’

We’ve all learnt to manage the customers who ‘thought they’d paid’, ‘meant to pay’ or ‘forgot to pay’, these guys are busy people, and we know they’ll pay. We schedule our phone calls every month, following the same process and the arrangement works, we know the routine.

‘The Delayers’

Yes, they’re the ones, they say they didn’t receive an invoice or they want a copy of a delivery docket, but they only tell you when chased for payment. We manage these guys like the busy guys, we know the routine!

‘The Jugglers’

Then we’ve got our customers who can have cash flow issues. These guys intend to pay and they take some chasing, the timing of payment varies but generally speaking we get there in the end. But sometimes these guys are too embarrassed to let you know the issues they have. Let’s face it, juggling cash flow happens to the best of us, but sometimes these guys can go silent, and when payments get too far overdue, the situation becomes awkward, for everyone. This is when we wish someone else would deal with the matter, right?

‘The Avoiders’

Another character we wish someone else would take off our hands is the ‘I avoid paying’ or ‘I won’t pay in full’ type of character. These are the guys you reflect upon and wish you had asked for payment up front or not been so keen to accept their urgent request. It may have been the first time you supplied to them and you were keen to take on a new customer. The excitement of a new account has now turned to regret at giving them credit terms.

We’re here to help

Don’t forget, we’re here to make it easier to reopen lines of communication with cash flow juggling customers, even if sometimes it means entering into a payment arrangement on your behalf.

For customers who are refusing to pay, we can have the difficult conversations so you don’t have to. We are used to managing these types of characters and we can have success where you may not have.

Debts aren’t just bad for business, they’re stressful.

Collecting Debt from Individuals

We are often asked, as a mercantile agency, how we approach collecting debt from individuals.

The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have produced a guideline. This guideline helps us to understand how the Commonwealth consumer protection laws apply to debt collectors, as well as in house collection departments within businesses. The guideline is online: https://www.accc.gov.au/publications/debt-collection-guideline-for-collectors-creditors

How may contact be made with a debtor?

If an individual owes you money and will not pay, you are entitled to contact them to ask for payment. You can contact them:

  • by phone
  • in writing (includes emailing, texting and social media contact)
  • in person.

 Am I restricted to when I can make contact?

Contact with a debtor must be made at reasonable hours, taking into account their circumstances and reasonable wishes. The following can be considered appropriate times and are the local times in the debtor’s state or territory:

  • phone contact between the hours of 7:30am–9:00pm on weekdays; and
  • 9:00am–9:00pm on weekends
  • No contact recommended on National public holidays

Face to face contact should be an option of last resort. Generally, face to face contact should only be made if reasonable attempts to contact a debtor by less intrusive means such as phone calls, emails or letters have failed, and face to face contact is considered appropriate and necessary. Reasonable hours of contact for face to face contact are:

  • 9:00am–9:00pm on weekdays and weekends
  • No contact recommended on National public holiday

How often can I make contact?

Debtors are entitled to be free from excessive communication or undue harassment. As a guide, contact should be limited (unless requested or agreed otherwise) to a maximum of 3 phone calls or letters per week (or 10 per month).

Generally, visits to the debtors home (or another agreed location) is not recommended and should only take place if there is no other way to make effective contact with the debtor, or if asked (or agreed) to a visit.

If repayment arrangements can be worked out over the phone or by letter, then face-to-face contact should not be necessary.

You must not:

  • threaten
  • harass
  • physically intimidate the debtor.
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