• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Shuriken Consulting

beyond the numbers

  • Pay your Bill
  • Tax Calculator
  • Contact Us
  • About
    • Privacy
  • Webinars
    • ATO Targets Cash Business
  • Services
    • Setup
    • Company Setup
    • Education
    • Finance
    • Insurance
    • Compliance
    • Bookkeeping
    • Tax and Accounting
    • Cloud Accounting
    • SMSF
    • Growth
    • Advice
    • Business Structure
    • Business Valuations
    • Wealth Team
  • Digital
  • International
  • Locations
    • Sydney CBD
    • Hornsby
    • Dural
    • Manly

Andrew Jeffers CEO / June 22, 2020

Reduce Your Debtor Days And Improve Your Cashflow

Managing the gap between the receiving money into your business and paying money out of your business is vital for sustaining viability.

Debtor days is the average number of days taken for a business to receive payment for goods or services. Keeping track of the average number of days for a business to receive payment is important in understanding the cashflow gap you might experience and the impact on cashflow planning and budgets.

How to Calculate Debtor Days

(Year-end receivables amount ÷ annual sales) x 365 days = average debtor days.

Here’s an example: An IT consultant has in her terms and conditions that payment is due 21 days after invoice date. But she is interested to know what the actual average payment time is.

Trade debtors at 30 June 2019 = $35,000

Annual sales for 2019 = $478,000

(35,000 ÷ 478,000) x 365 = 26.7 days

With this information, she can either alter her cashflow planning according to the actual time-frame or take steps to reduce the average number of debtor days.

What can you do to reduce the payment times?

  1. Update your payment terms – and make sure the terms are clear on every invoice issued. Don’t forget to include bank details on the invoice!
  2. Regular admin – schedule a regular time for your own administration and get your invoices out promptly.
  3. Send to the right person – when you send invoices, make sure you address the email personally to your contact. Send the invoice to multiple addresses if possible, for example, your contact and the accounts department.
  4. Use technology to your advantage – use automated invoice reminders to notify customers when an invoice is about to be due and then when it is overdue. Do not wait to send notifications manually, let the software do it as soon as the invoice is a day overdue.
  5. Make it easy for your customers – list the payment terms, for example, due in 14 days, as well as the actual due date.
  6. Provide incentives for early payment – for example, a 5% discount if paid within five days.
  7. Offer several payment methods for clients – make it easy to pay by adding an online option such as credit card or PayPal.
  8. Offer instalment payment plans – over a mutually agreed period. This allows you to plan for part payments, rather than being inconvenienced by the whole invoice being paid late.
  9. Do not offer unlimited credit to customers – make sure your terms and conditions include the right to refuse further supply if invoices are outstanding. Request part or full payment before supplying more goods or services.
  10. Talk to your suppliers – Maintain good relationships and clear communications so they are more likely to help you if you need an extension on your bills. If possible, renegotiate supplier terms that suit your business cashflow.

During tough times it can be difficult to get paid on time. Use low activity phases in your business to update your terms and conditions, implement alternative payment options, think about ways of making it easy for customers to pay you and clarify information on your website.

Talk to us about adding payment options, updating your software and improving business systems to assist in reducing the number of debtor days to improve your cashflow. We can also look at average debtor days of your business compared to industry averages and discuss ways of managing cashflow during difficult periods.

contact-shuriken-today

Filed Under: Andrew Jeffers, Business, Business Planning Tagged With: Andrew Jeffers, Business, marketing, marketing goals, shuriken, shurikenconsulting

Primary Sidebar

Recent Posts

  • August 2021 Tax And Accounting News: All You Need To Know
  • Exclusive Probians Offer
  • Tax & Accounting Questions Answered Free for Probians
  • Government support for your business
  • Succession Planning for Small Businesses

B1G1

“Imagine if every time you made a step forward in your business, it had an unimaginable impact on the lives of others…”

Footer

Services

  • Company Setup
  • Education
  • Finance
  • Insurance
  • Bookkeeping
  • Tax and Accounting
  • Cloud Accounting
  • SMSF
  • Advice
  • Business Structure
  • Wealth Management
  • Business Valuations
  • Digital Marketing
  • Shuriken International
  • Events

About

Shuriken is at the forefront of accountancy, providing clients with a broad range of services, coaching and mentoring.

Contact Shuriken if you want to launch or grow a business or if you want to get a clear action plan on how to achieve your financial goals. We can help with benchmarking, cashflow forecasting, payroll and much more.

Learn More

NSW Business Chamber Member

Contact Us

Sydney CBD

T: 1300 886 066 or (02) 9114 8544

Hornsby

T: (02) 9485 3400

Dural

T: (02) 9651 2288

Endorsal

  • News
  • Events
  • FAQs
  • Contact Us
Terms of Use Privacy Policy Disclaimer