We know that bad debts can be catastrophic to a business’ cash flow but late payments can also cause problems for a business owner, far beyond just being an irritation.
When companies can’t predict their future cash flow accurately, they cannot make decisions which could support future growth such as buying equipment or recruitment.
Are your clients’ debtor days getting longer?
According to Xero’s UK Small Business Insights, which aggregates small business accounting data from its platform, by June 2023 companies were waiting longer for their invoices to be paid, at 29.6 days, which was 8.3 days after the agreed credit terms. These figures represent the worst situation since October 2020.
The manufacturing sector experienced the longest average debtor days (36.1), followed by professional services (33.0) and information media and telecommunications (32.4).
Powering up their credit control
Previously, those chasing debtors for payments usually focused on the oldest debts first. There was no other way to prioritise their effort.
However, clients who use Capitalise for Business can access the Credit Risk Manager function. For every trade debtor company they will see the credit score, credit limit and can sort according to whether that risk is high, emerging or low.
If your client has linked their cloud accounting software, they will also be able to see the current outstanding debtor balance, how many invoices that represents and how old each invoice is.
Combining all this data in one place means that credit control can be efficient like never before.