Finances and cash flow – reducing debtor days
Is debtor days the problem?
In my last newsletter, I posed questions about finances – we know that many legal firms, whilst highly profitable, struggle with cash flow. The last stage in the process is the collection of the debt from the invoice. Do you know
- the debtor days figure for the whole business?
- which departments ? functions have the longest-outstanding debts?
- which have the shortest?
- why they are so different?
Whilst some businesses get stuck in statistics, some basic information is vital. If you don’t know what the figures are, you can’t assess what’s reasonable and what to aim for.
At what point do you start chasing the debts as it is often only when they are overdue and, at this point, how often is there a query about an invoice? How about phoning them a couple of days after the invoice has been sent, to see if it’s got to the right department and are there any queries? If you establish what the queries are early on, you have far more chance of resolving them and still being paid on time and, if there is an error or issue, you are seen as more proactive and helpful to the customer.