You have a process for managing debtors
Collecting payments from customers as soon as agreed transactional terms and conditions allow is essential if your company to maintain the cash flows needed to run the business. Late payments from customers result in a lack of funds which can eventually affect all of the companies within the supply chain.
Key Issues
·         The cash needed for running your business and supporting your upstream supply chain comes from your customers paying for the goods and services they buy.
·         These funds provide the cash needed to cover all the business overheads plus the wages of employees and the purchase of materials and services
·         The sales and senior management teams should be involve themselves, as appropriate, to ensure that customer payments are made on time
·         Collecting payments from customers is a important task and requires you to:
o      Be consistent in how you pursue and obtain payments
o      Establish who in your customer is responsible for releasing the cash
o      Adopt a professional approach, reminding customers in advance when payments are due and expecting payment to be on time
o      Develop a good working relationship with your customers’ senior managers so that outstanding issues and special circumstances can be discussed
o      Ensure all customer paperwork is accurate and on time. Any queries should be promptly and adequately addressed, leaving no reasons for payment to be withheld
·         Outstanding balances should be reviewed daily by the senior finance and sales managers. All necessary actions should be taken to obtain payments
·         A senior manager should personally write to the managing directors of customers with outstanding bills, requesting an immediate settlement
·         Payment terms for large contracts should be negotiated as part of the selling process and can be used tactically to increase the chance of winning orders
·         Sales managers should undertake a financial risk assessment for new customers and take responsibility for restricting exposure to non payments
·         You should undertake a regular financial review of significant customer accounts to assess the risk of non payments resulting in bad debts
·         Your finance manager is responsible for monitoring outstanding invoices and taking actions to ensure the business has the cash required to trade
·         Ideally, you should arrange to receive payments from customers before having to pay suppliers
Factors for Success      
Factors to  Avoid
1.     You monitor your cash position every day
2.     You deposit all cheques and cash into your bank account promptly
3.     You establish strong relationships with key customers and work in partnership with them
4.     You actively manage all risks of bad debt
1.     Sending standard official requests for payment to your key customers
2.     Creating inaccurate paperwork that provides a reason for non-payment
3.     Allowing customers to accumulate significant overdue debts
Who does this apply to?
Senior management team, finance manager, sales manager
Realisable Benefits
A predictable flow of cash into the business, allowing you to trade A predictable flow of cash into the business allowing you to trade confidently


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