Normally I’m delighted to hear that a business is getting paid by direct debit because DD is the silver bullet of credit control.
But when I heard a senior manager in XYZ Limited say this about their invoicing and their accountants, you could have knocked me down with a feather!
So, let’s see how they could have avoided getting into this mess in the first place.
Raise your sales invoices as soon as you can
Every business needs to raise its sales invoices as soon as it can. Make sure they are:
- correctly describing the goods / services sold and are correctly priced
- addressed to the correct person and contain a PO number if required
- sent by email – ideally as a PDF not as a link. Why make it difficult for your customer?
- accounted for as soon as possible if they’re not raised in your accounting software
Do this and you know how your business is performing from a sales perspective and you know how much money you are owed.
Get cracking with credit control straight away
Credit control differs for every business but however you go about credit control get started straight away so your invoices have the best chance of being paid on time.
This blog isn’t about credit control but there are a couple of links at the end which you might find helpful if you’re a bit rusty.
This blog doesn’t need to be about credit control because XYZ Limited gets paid by direct debit!
What could have been done differently?
It so happens that we use the same direct debit provider as XYZ Limited and this is how we would have gone about things.
The first step is to link the direct debit service to your accounting software.
As new clients come on board you send them a direct debit mandate to complete, stating your payment terms clearly so the client knows when their payments to you will leave their account.
Pro tip: If a client won’t sign up to direct debit you should seriously consider not working with them as they could well turn out to be a bad credit risk. And who needs that?
Raise your invoice, using the agreed payment terms, and send it to your client.
Sit back, relax and you’ll be paid on time. And if you use the combination of DD provider and accounting software that we use, the accounting for the payment will be done automatically.
Bookkeeping in the 21st century
There’s a link below to a blog about this.
Essentially we live in an age in which all sorts of online platforms exist for making sales and receiving customer payments.
This is generally a good thing but it does require businesses, bookkeepers and accountants to know what they’re doing and walk through every step of the sales process, from order to payment, making sure everything happens in the right order and is working correctly.
You establish workflows that work and scale from there.
It seems that XYZ Limited and their accountants have somehow tied themselves up in knots with a very visible outcome – XYZ’s clients aren’t getting their invoices even though they have made their payments.
Not a good look for XYZ Limited!
Workflows, accounting, getting paid – can we help?
Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk
Michael
Related links:
This is bookkeeping in the 21st century
Five tips to improve your sales invoicing
Getting paid on time – your company is NOT a source of alternative finance!
Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW
