For some time now, news reports have been warning us of New Zealand’s growing national debt, calling it the “debt bomb”. Although most of the money owed is attributed to personal housing loans, a good chunk of it—a whopping $91.34 billion—came from business debts. Experts fear this number will continue to increase if entrepreneurs don’t start making smarter financial decisions.
The problem is that many business owners, especially those in the SME sector, consider debt management as a complex and tedious process. As a result, it’s often put off to the last minute and this is when the trouble begins. But the truth is that debt management doesn’t have to be complicated or frustrating. All you need is a clear action plan to make the process simple and effective.
Tell-Tale Signs You Need a Debt Detox
But before you start creating such a plan, you must first learn to identify the signs that your small business is experiencing debt management issues. Here are the most common indications:
- It’s taking you too long to collect on accounts receivables
- You and your staff spend far too much time chasing overdue invoices
- Your relationships with customers are being strained by late payment issues
- The stress of your overdue debt is taking a toll on your health
Debt Detox Steps for SMEs
If you have all the signs outlined above, then your business needs a debt detox stat! Here are a few simple steps you can follow today:
- Establish goals for accounts receivables users the data from financial reports like your balance sheet and profit and loss statements to identify how much funds you need to collect weekly in order to improve cash flow. It would also be a good idea to ask your accountant to review your Accounts Receivable Turnover Ratio and Days Sales Outstanding. Determine what the effect will be on your overall cash flow if the numbers from these reports are improved and use that to set measurable debt collection goals.
- Check and update client details collecting payments from customers would be extremely difficult if you don’t have the right contact details. This is why it’s crucial to make sure your records contain the updated customers’ details. When updating records, it’s best to start with the oldest clients because the older a debt gets, the harder it will be to successfully collect payment.
- Review and upgrade your credit policy should always reflect the current needs of your business. This is why it’s important to regularly check your credit policy and see if it needs an upgrade. When doing this, make sure your new credit policies meet the following objectives:
- your business gets paid on time
- helps you maintain good relationships with customers
- Consult a debt collection firmIt’s a misconception that debt collection firms should only be used as a final option when overdue invoices have piled up so high that a business can no longer deal with them on their own. But the truth is that the earlier you contact them, the more they’ll be able to help you. Having professional debt recovery specialists on your side from the very beginning will help your business get its most significant returns efficiently. So, what are you waiting for? Get in touch with our team here at Slater Byrne NZ today! Call us at 0800 445 870 or send us a message at [email protected].