As the end of financial year approaches, many businesses are turning their focus to clearing outstanding debts, tightening cash flow, and preparing their account. In the current economic climate, managing cash flow is a big challenge for business owners. Delays in payment, whether due to poor debt recovery practices or a lack of systems, can significantly affect your financial position.
So, how do you maximise collections, reduce losses and get your business in shape before 30 June?
Here are our 5 top tips:
1. The contract:
While verbal agreements can be legally binding, they often lead to disputes. Putting your contract in writing from the outset clarifies expectations – what is being supplied when it's due and how payment will be made. This reduces ambiguity and avoids the classic "he said she said" scenario.
2. Know your customer:
It may seem obvious, but many disputes arise simply because businesses don't know who they're actually trading with. Ensure credit applications and contracts are fully completed and verified. Simple steps, like checking ASIC's public records, can confirm that your customer is a valid legal entity. Don't skip this step, especially when chasing EOFY settlements.
3. Retain proof:
If you need to pursue a debt, being able to prove the terms of the agreement is critical. Keep copies of signed contracts, quotes, purchase orders, tax invoices and any admissions of debt. Solid documentation could be the difference between recovering your money or writing it off at year-end.
4. Establish a debt recovery process:
Have a system that flags and follow up unpaid invoices early. As EOFY nears, being proactive helps maintain momentum and credibility. Set reminders for sending follow-ups, track responses and resolve disputes quickly. Make a note of returned mail or undelivered emails – this information can be crucial later.
5. Outsource:
If internal demands haven't worked, consider engaging a professional. A letter of demand from a solicitor often adds weight and urgency, especially as businesses look to finalise accounts by 30 June. Whether you're dealing with a payment arrangement or preparing for legal action, outsourcing can ensure matters are handled promptly and effectively.
With the financial year closing soon, now is the time to act. Proactively managing overdue accounts now only improves cash flow but positions your business for a cleaner start to the new financial year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
