A Sale is not Completed Until You Are Paid

Hello, I’m Peter Towers, Managing Director of ESS Small Business and ESS BIZTOOLS.  Welcome to Empowering SMEs.

Company directors and committee members of organisations have a clear responsibility to protect their company’s/organisation’s assets.  For many companies/organisations, debtors are a large asset.

The “management of debtors” is a key area for directors/committee members to enquire about – to satisfy themselves that appropriate systems have been implemented and that the systems are operating efficiently.  Directors need to enquire about:

• Is there a written debtors system (if there is no written debtors system – a director should suggest that the managing director appoints an accountant/consultant to prepare a written debtors system that suits the company/organisation’s requirements) which contains appropriate documentation for:
• credit application form
• internal processes for checking the credit application
• ensuring that, if the applicant is a company, directors’ personal guarantees have been received
• a proper process to approve a new credit customer including credit limit and payment terms
• dispatch of a “new customer letter” together with
• Terms of Trade Agreement
• Retention of Title Agreement
• a follow-up system to ensure that the signed Terms of Trade Agreement and Retention of Title Agreement are promptly returned by the new customer
• an internal process to ensure that a decision is made on every customer as to whether that customer should be registered on the Personal Property Securities Register
• if a decision has been made to register a customer on the Personal Property Securities Register, is that system functioning satisfactorily?
• Are all appropriate persons within the organisation informed of the new customer that has been approved and the credit limit and payment terms applicable for that customer?
• Are tax invoices prepared accurately and promptly sent to customers?
• Do the tax invoices contain the details of the due date for payment?
• Are debtors’ statements prepared promptly at the end of the trading period?
• Does the customer receive a communication to advise them of an approaching payment date for an invoice?
• If payment is not made on the due date, is there a follow-up process implemented within 48-hours?
• Is a calculation made at the end of each month of the debtors’ days outstanding for the business?
• Is there a follow-up process within the company/organisation to ensure that direct approach is made to any debtor who has not paid?