Debtors & Creditors
Effective Debtor & Creditor management is the cornerstone of any successful company.
*In Funancial, a debtor is any client who owes you money.
*In Funancial, a creditor is any supplier who you owe money to.
Funancial works with the invoice due date as configured within the accounting package to determine the state of that invoice i.e. whether it is settled, paid in full or has any remaining portion to be settled.
We take it a step further. We understand that in real life, while you establish net periods for payments by the client e.g. net 30, net 60, reality happens when people do not pay you in time or in full. For this Funancial categorizes each debtor & creditor invoice into one of four action categories:
- Act now
- Do something
- Make a decision
Interpreting Debtor Categories
Debtor information is presented in Funancial within:
Invoices in this area, typically represent the invoices which you are due to be paid within a reasonable period e.g. 30 days or 45 days since issue of invoice. While there is nothing to worry about for invoices in this category. it is important to follow up with your clients every 2 weeks to ensure payment will be on time and settled without trouble.
Invoices in this area, represent invoices which have jumped your reasonable tolerance of payment not being settled. If you have any invoices in this area, it is not time to panic yet, but it is not a good sign either. It is important to follow up with your clients to ensure that they do not delay payment unnecessarily. By this point unpaid invoices start effecting your cash flow, which in turn limit your cash and time availability to invest in new/additional business.
Invoices in this area represent invoices which are well overdue your reasonable tolerance, and indeed it is time to start panicking. Increase your efforts to collect the money due from these clients. Remember that the longer a client takes to pay, the less likely they are to pay you.
You are in dangerous ground. You have already spent time and/or expenses to deliver your solution to them. It is not in your interest to have clients who have not paid you in such a time frame, and are now requiring further effort and time on your side to get paid. Make sure to follow up with your clients so that they understand that are unreasonably behind with these delays, and that these dues are expected to be settled without further delay.
|Make a decision |
Unfortunately, the more time passes, the less likely you are to successfully collect this money without additional third party costs.
Unless, you have an extraordinary agreement with these clients, you need to make a decision on whether to seek legal advice, engage a cash collection agency or prepare to write it off.
*Separate to the payment terms as configured in your accounting package, you can configure Funancial to apply a separate set of tolerances to your invoices.
For e.g. your accounting package may be configured to let clients know their payment terms are net 30 on the invoice, however you are still ok if the client pays you within 45 days.
You can configure Funancial to place invoices which are still within the 45 day window in the Monitor category. You can configure these tolerances from Configuration > Company Settings > Operational
Interpreting Creditor Categories
As happens in debtor management, equally important is creditor management. It is important to keep great relationships with your suppliers. Use the information presented in the creditor management views to keep the best of relationships possible with your suppliers.
Funancial allows you to categorize the bills and invoices you are due to pay in similar categories with similar strategies for tolerance management.
*IMPORTANT: If your bookkeeper does not update your accounting package on a daily or weekly basis, Funancial SMART's usefulness will be severely limited!. If you need us to, we can help with bookkeeping. Just reach out to us via our Help Centre.