“Future Proofing” Includes SMEs Debtors’ Management

Welcome to Accountants Minute.

There are two major issues for accountants to consider relative to “future proofing” and SME debtors’ management:

• Australia has the dubious title of having the “longest debtors’ days outstanding in the world”.
• Offering proactive debtors advice is a significant contribution to “future proofing” for accountants.

The problems to be solved include:

• Identifying the clients with high debtors’ days outstanding – over 40 days.
• Identifying clients who are contracting and receiving progress payments. These will probably be trades and subcontracting businesses who are contracting with contractors and larger business organisations which could encounter a problem with a liquidator.

The consequences of this are that the liquidator might then decide that some of the progress payments made to your client have been made in such a way that the liquidator deems that these payments were “preferential payments” and that the liquidator then issues a demand for the repayment of the “alleged preferential payments”.

Whilst your client might be able to get some re-dress from the courts, this is costly and might not be successful.

If your client had registered on the Personal Property Securities Register, in all probability they will have avoided this problem!

• Do your clients have a written debtors’ system covering these items?
• credit application form
• processes for checking credit application
• approval of credit application and establishing – limit and payment terms
• welcome to new customer letter including:
  • Terms of Trade Agreement
  • Retention of Title Agreement
• follow-up to receive the signed documents back from the new customer
• decision on whether to register the customer on the Personal Property Securities Register
• processes for the preparation of the tax invoice – showing due date for payment
• calculation of debtors’ days outstanding at the end of each month
• collection processes
• alert in relation to approaching payment date
• follow-up if payment not received
• debt collection processes

What do you need to do to perform your duties as the “Trusted Advisor” to your small/medium enterprise clients who, in most cases, will not be employing people with sufficient knowledge and training for this very important process?

The process commences with submitting a proposal and quotation to your client.

Advising your clients on improvements in debtors’ management is a proactive service that will assist your clients to operate their businesses and will contribute to “future proofing” your accountancy business because, in most cases, this will be a new source of fees.  Indicative fees for these services, if you are utilising ESS BIZTOOLS’ products, are: