Poor cash flow has always been the biggest cause of failure for small businesses. Often this can be due to a too high ‘debtors days ratio’, the ratio that measures how quickly cash is being collected from debtors, those individuals or companies that owe debt to you (the creditor), as a result of borrowing or issuing bonds.

This has been an age old problem and can be caused by a number of seemingly small issues, such as slow payment of invoices from customers.

However, no matter how insignificant as they may seem, if these issues are not addressed, a too high debtors’ days ratio can result in cash flow problems and without cash flow; you cannot sustain nor grow your business.

If you want to avoid debtors spiraling out of control and help alleviate your cash flow concerns, you must set up effective, efficient and doable procedures around your credit control.

So, here are some of the things or tips to manage your debtors:
  • Determine who your debtors are. Make sure that you have a list of invoices issued, invoices paid and outstanding invoices and the age of the debt.
  • Set up credit terms and limits. You must decide on the limit you will allow each customer to owe you and make sure that they do not exceed this. Make sure also that they agree on your payment terms. Take note that you should not allow your customers much better payment terms than you are able to agree. If possible, perform credit checks on businesses that you don’t have previous payment history with. This will help make it easy for you to make decisions on terms, limits etc.
  • Don't delay on sending invoices out. This should be done as soon as goods are provided or a service has been delivered, or as stipulated in any contract. Make sure that you have quoted any references provided by your customer to avoid any delay in it being processed.
  • Remind and chase. Don’t hesitate to remind customers of the amount outstanding on a regular basis. Set up procedures for chasing debts which set out when each stage should be used and when it should be escalated to the next stage e.g. phone calls, letters, and legal action. Take note that under the Late Payment of Commercial Debts legislation, you can charge interest and reminding customers of this may speed up payment.

Fortunately, all of these debtors’ follow-up procedures can now be automated by availing of Shoebooks Auto Debtor Reminder feature.

With Shoebooks accounting software for small business Auto Debtor Reminder you can now improve your cash flow by automating your debtors follow procedures.

With Shoebooks Auto Debtor Reminder pre-loaded templates on its accounting software business, you can now easily schedule email or letters reminders to go to your clients with outstanding invoices.

Shoebooks Auto Debtor Reminder will not only enable you to configure automatic reminders to your customers about outstanding invoices, but you can also configure your reminders to match your accounts receivable policy as well as send reminders via email to customers based upon the schedule you choose. Shoebooks Auto Debtor Reminder have reminder templates available to select from for each email or letter sent.