Australian businesses are notorious for making late payments with a study identifying that on average invoices are more than 26 days overdue. [1]

If this is your experience, rather than accepting late invoices as part of normal business life, be assured it doesn’t need to be the case, as it could be costing your business tens of thousands of dollars.

The ability to measure all aspects of your business performance is paramount in this situation and its power should never be underestimated. Implementing sound real-time accounting and financial management systems or reviewing and upgrading the system you have, can make a significant difference to your business.

In the following scenario, we highlight how late payments can have serious implications for your cashflow and in turn the health of your business.

T.J. Jones & Co is an electrical engineering business with an annual turnover of $2 million per annum. While T.J. Jones has standard 30 day payment terms, in most cases, invoices are paid up to 20 days late.

As T.J. Jones always get paid in the end, the management team didn’t place too much attention on debtor management. However, a review of their existing financial management system identified that late payments was causing cashflow issues and costing the business money. Late payments were reducing their ability to service their loan on machinery purchased to grow the business, preventing the business from achieving increased profits and curtailing their growth potential.

With an annual turnover of $2 million, and most invoices paid 20 days late, it is estimated that T.J. Jones has approximately $273,972 owed to them by debtors each year. By measuring this important financial indicator and implementing upgrades to their existing financial management system, late invoice payments were reduced by 20 days back to 30 day terms, which created a cashflow improvement of approximately $109,000. This cashflow improvement allowed T.J. Jones to more effectively manage cash flow, increase loan repayments and reduce the interest on his machinery loan.

Being able to accurately measure your true financial performance opens up opportunities to improve your debtor payments. We can help you with strategies to improve your debtor days including debtor days calculations to identify appropriate payment terms for your business, implementing automatic invoice generation, establishing invoice tracking systems and reminders or implementing incentives for on-time payments.

When it comes to making the most of your business, it’s not just debtor days which can have a serious impact on your business. Other areas which can affect business performance and your plans to grow include:
•    Inventory management and stock turnover days
•    Payroll and employee scheduling
•    Budgeting and cashflow forecasting, and
•    Other matters which could be holding you back from reaching your business potential and personal prosperity.

With accurate, real-time information available, we are well placed to analyse your accounts and financial position to help you understand your business more intimately. By identifying a realistic strategy, we can help you implement a scheduled series of small changes over time which can make a big difference to your business.

Let us help you make the most of your business. We can help you implement a real time financial management solution tailored to your business needs and provide bookkeeping services to help give you confidence in your figures. Please contact our team on 03 9708 8801 or email to discuss your business needs.

At Robinson Voss Partners, we have over 30 years’ experience helping business owners throughout all stages of their business.

General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.