Debtor days (aka Day Sales Outstanding / DSO) are a major issue for businesses and can significantly impact on your cash flow.
Ask most people how to reduce them and they recommend putting a more stringent collections plan in place. But what if the problems owe more to how you produce and send invoices rather than the willingness of your clients to part with their money?
In our experience even the largest companies have people, process and system problems that slow down payments before the invoice has left the building. For example, sending invoices to the wrong address, sending duplicate invoices or not applying discounts or extra charges. Sending the right invoice to the right person in the first place immediately impacts not only the time it takes them to pay but the time, effort and consequent internal cost of producing and managing payment requests.
If you are going to create a solution that delivers real, long-term results you need to go back to basics.
Here are the three fundamental questions we’d recommend asking at the start of your analysis:
- Are the systems in place to collect, store and facilitate access to the correct data?
- Are the processes for these actions well defined, understood and appropriate for creating the desired outcome?
- Do the people involved follow the processes correctly and use the systems in the correct manner – if not is this due to a lack of knowledge or training?
Looking at your process in this way, from end to end, you can identify where problems are actually arising – not just where they are being felt. You’ll then be better placed to resolve issues in a way that creates real, long term, valuable solutions not just temporary fixes.
