Best Practice for Accounts Receivable

Have you resolved this year to improve the cash flow in your business? In the resources section of our website there’s a paper on dealing with cash flow problems.

One of the main areas where cash can be tied up in your business is in your Debtor’s Ledger.

Accounts Receivable or Debtors are the amounts that you have invoiced your customers but they haven’t paid yet. Often this is one of the largest assets in your business and yet, your biggest need for working capital. After all you have to pay wages every week or two. You have your own bills to pay so waiting for your customers to pay you can put severe pressure on a business.

Best Practice for debtor management includes:

Get the preliminaries right before making the sale

  • Set your price
    Establish the cost of your product/service up front so there are no surprises or excuses. Give quotes & estimates where needed.
  • Establish your Terms of Trade
    Terms of trade help establish your legal relationship with your customer. Before selling to them you should provide them with a copy of your terms of trade. A lawyer can help you establish appropriate terms of trade for your business, or we can provide some sample terms, or review yours.
  • Credit Assessment
    Only sell to people who can afford your product/service and intend to pay you. Where you can, check your customer’s credit rating and payment history with other creditors. Read More »