Money management is an essential piece to any industry for any business. You need to have a firm grasp on what money is coming in and what money is going out — this is vital to your company’s future.
But, the money doesn’t always come in right away, and you have to struggle to figure out how it will affect your cash flow.
This delay is called debtor days — they are the average number of days it takes for your business to receive a payment from a client for the products and services you rendered.
Essentially, you are spending money and time to deliver the goods and services your clients wanted and then waiting to be reimbursed. It’s easy to see why this can be hard on a business.
You have expenses involved in delivering the services and products, including:
- Keeping inventory on hand
- Purchasing materials
- Paying wages to employees
- Operational costs
- Facility leases and bills
So while you’re waiting to collect, you’re still spending money without money coming in to replace it. If this continues and you can’t pull in new money faster or at least at the same pace that it’s going out, this can damage your business.
Accounting and legal firms are no different to their small business clients. They need good cashflow to enable them to pay the bills and invest in their business.
What’s Possible if You Lower Your Debtor Days
When you lower your debtor days, you don’t have to worry about the debtors on your balance sheet or “locked-up cash.” The efficiency of your accounts payable and other business opportunities will increase when your debtor days decrease.
Here are 3 key benefits of lowering your debtor days and bringing in more cashflow.
1. Upgrade Your Technology and Improve Efficiency
If you are currently using basic software to operate your business, collect payments, and connect with clients, would you jump on the opportunity to integrate updated technology?
Knowing what tools your business needs to succeed and stand out against the competition is crucial. As an accounting firm or legal practise, it is vital to stay on top of the latest software available, not just for your business and employees but also for client ease-of-use.
Modernising your legal or accounting firm with the right technology requires adequate funds to do so. With lower debtor days and more cashflow, your firm can invest in new or upgraded software as a growth mechanism for your business.
Optimising performance can be a more straightforward process with the right technology at your disposal. Integrating the right apps with your legal and accounting practise management software can streamline business processes and enhance outcomes for clients.
Streamlining the business process may include:
- project and time/task management
- flexible searching
- client intake processes
- calendar management
- billing solutions (like an online payment gateway that could further improve your average debtor days)
- and more
Lowering debtor days and increasing cashflow enables you to address software inefficiencies your business may be experiencing.
2. Invest in Marketing and Bring in More Clients
Accounting and legal firms also rely on marketing, both printed and digital, to reach their existing and potential clients.
Marketing defines how a company will stand out against the competition, and it is an important factor in the level of growth a company may experience.
Capitalising on an increased cashflow and redistributing funds to include a marketing budget could mean great things for the future of your firm.
If you and your team have the time to develop a marketing plan on your own, establish goal markers to see how your marketing reaches your target audiences. Utilise tech products like email or social media automation software to save time and get a broad audience, or focus on a niche market using your existing client base as a networking guide.
Many firms that do not have an in-house marketing team and do not have time to develop marketing strategies on their own may outsource the work to an agency that offers a full spread of services.
3. Hire More Staff
When you’re short on finances and time, it’s hard to distribute your attention to all the tasks that need to be finished.
With increased cashflow at your disposal, you can focus on completing tasks and growing other areas of your firm, including hiring. However, to create polished workflows and maintain consistency in the day-to-day, repeatable tasks, you need proper staffing levels.
Many small firms don’t have the resources or time available to adopt good practises for hiring and managing their teams. Finding the right people as well as onboarding, training, and managing them requires an efficient process. However, it isn’t just about the actual searching and hiring process alone. New hires need to understand your firm’s values and how team members interact with and treat one another, as well as clients.
Finding yourself turning down new clients or existing work, missing deadlines, neglecting or falling behind on essential tasks, or failing to communicate correctly can have a negative effect on your firm’s growth potential and are a signal that it’s time to hire.
When you have the cash coming in, you can use it to onboard more employees and maintain the success of your business.
Want Better Cashflow for a Better Business?
By now, you can see how helpful it would be to get more cash on hand and have less sitting in limbo waiting to be collected.
But — how do you lower your debtor days and maintain consistency/an increase in cash flow?
With FeeSynergy Collect, we focus on increasing cash flow, meaning more money in your firm’s bank account and more growth opportunities as well.
As the #1 provider of debtor management software in Australia and New Zealand, our team at FeeSynergy is ready to help your accounting or legal firm expand automation systems, software options, and cashflow.
Contact us or book a demo today to see how we can integrate our practise management system and other payment features into your business today.