Debt Recovery

If you provide any form of credit to your customers and/or clients, you will need a debt collection procedure in place to protect the cash flow of your business. I will discuss more about debt collection court proceedings and the process of debt collection in section 10.3.

You will have heard that ‘cash is king’ for any business; this refers to the operating cash flow of a business. The debts that are paid to your business from your customers and clients are your operating cash flow. It is vital, especially in the early days of your business, that you are paid by your customers and clients as quickly as possible, so that you can pay your debts as and when they arise.  Ideally, you should ask clients to pay upfront for your work or at least stage progressive payments as the work proceeds.

If you are unable to do that then you should consider making payment due upon completion of work or delivery of your Product. However, if your customers and clients need a little more time, use seven or 14 day accounts. The reason for this is that you will have accounts that will be due and payable at various times, and you must always ensure that your accounts payable do not exceed your debtors so that your business has sufficient operating cash flow available for you to pay off the debts of your business.