{"id":4398,"date":"2020-12-21T00:00:48","date_gmt":"2020-12-20T13:30:48","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/3-ways-to-better-manage-invoice-payments\/"},"modified":"2020-12-21T00:00:48","modified_gmt":"2020-12-20T13:30:48","slug":"3-ways-to-better-manage-invoice-payments","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/3-ways-to-better-manage-invoice-payments\/","title":{"rendered":"3 ways to better manage invoice payments"},"content":{"rendered":"
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For many businesses, invoice payments are a source of ongoing cost and headache. In this article, Graham Bowers discusses ways to improve your situation.<\/p>\n

Your business growth and success depend on the health of your cash flow. The more cash reserves you have, the more confident you can be in exploring new opportunities, scaling your business, or paying off debts.
Overdue invoices are one of the key factors that can hamper the health of your cash flow.<\/p>\n<\/p>\n

In fact, cash flow was reported among the top three reasons for 51 percent of failed business in the 2018-19 financial year, according to ASIC.<\/p>\n

And in the June 2020 quarter, debtor days increased by 7.7 percent year-on-year, the sharpest increase in 10 years according to Illion (previously Dun & Bradstreet).<\/p>\n

While invoicing terms and eInvoicing have become an increasingly frequent part of the discussion at industry level, there is yet to be a holistic framework offered. Instead, business owners should consider how to best integrate the systems at their disposal.<\/p>\n

This article discusses the common ways businesses currently approach invoice payments as \u2018best practice\u2019 before offering three ways in we can all do better.<\/p>\n

Invoice payments and credit terms: Risk vs reward<\/span><\/h3>\n
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Business owners or CFOs are typically engaged in a balancing act between managing the risk of late payments and offering credit to loyal customers that can help increase sales and retention.<\/p>\n

To add to the complexity, the ongoing economic and social climate has brought fresh challenges in the business sphere where late payments are compounding the problem of reduced sales volumes.<\/p>\n

While businesses have traditionally deployed email reminders, dunning letters and phone calls to get their invoices paid, these have yielded less than optimum results.<\/p>\n

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A sale\u2019s not a sale until the cash is in the till<\/span><\/h3>\n
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General practice considers customers only to be overdue 90-days after the invoice date. But, at the end of the day, unless the cash in the bank, an invoice unpaid is an invoice overdue.<\/p>\n

Averaging across the payment trends of over 200,000 businesses that use\u00a0ezyCollect, we found that over 40 percent of ledgers are overdue and outside terms.<\/p>\n

For an average-sized business with a monthly turnover of a million dollars, this can represent $400,000+ of cash tied up in receivables.<\/p>\n

What could you do with an extra $400,000 in your business bank account?<\/p>\n

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Write-off writing off bad debt<\/span><\/h3>\n
\n

Credit references \u2014 which, to be honest, are little more than hearsay \u2014 are subjective and unreliable. Obtaining credit reports, which are based on verified data, are expensive and are costly on administrative resources. Yet we rely on these \u2018best practices\u2019 before issuing credit terms.<\/p>\n

We should no longer have to accept that a proportion of our ledger will end up as bad debt.<\/p>\n

3 ways to be better than \u2018best practice\u2019<\/h4>\n
    \n
  1. \n

    Tailored, polite (and persistent) reminders<\/span>\u00a0\u2014 After 45-days end-of-month terms, people genuinely forget. In FY21Q1, just over 50 percent of overdue receivables were collected when customers were sent a reminder, averaging across the payment trends of over 1,000 Australian and New Zealand businesses.<\/p>\n<\/li>\n

  2. \n

    Provide a variety of self-service methods for payment<\/span>\u00a0\u2014 22 percent of B2B credit card payments are made after 5pm and before 9am. Make it easy for customers to give you money by allowing them to make payments at any time in a method convenient to them.<\/p>\n<\/li>\n

  3. \n

    Utilise smart data to understand how customers will pay you<\/span>\u00a0\u2014 Even if you leverage credit reports, these only reflect how a customer has paid the industry in general. It doesn\u2019t look at their payment behaviour towards you specifically. Take into consideration company events such as a change in directors or penalty notices as well as your rapport and relationship with them.<\/p>\n<\/li>\n<\/ol>\n

    Please contact us on |PHONE| if you seek further discussion on this topic.<\/p>\n

    Source : MYOB October 2020\u00a0<\/a><\/span><\/p>\n

    Reproduced with the permission of MYOB. This article by Graham Bowers<\/a>\u00a0was originally published at\u00a0https:\/\/www.myob.com\/au\/blog\/3-ways-to-better-manage-invoice-payments-in-2020\/<\/span><\/p>\n

    Important: This provides general information and hasn\u2019t taken your circumstances into account. It\u2019s important to consider your particular circumstances before deciding what\u2019s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.<\/span><\/p>\n

    Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/span><\/p>\n

    \u00a0<\/p>\n

    \u00a0<\/p>\n<\/div>\n

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