Having appropriate financing and an accounting system in place can often be the difference between success and failure of a business.

The wrong type/mix of finance will result in a mis matched balance sheet with strain being placed on the business. Lack of control of working capital can expose the business to unnecessary and avoidable risks. It is vital companies control this requirement and use accounting systems to help predict when shortfalls may occur. One of the risks is late payment both when paying (reputation risk and future cashflow) and receiving (cashflow).

(Working capital = Inventory days + receivable days - payable days)

The list below highlights areas when the accounting system can help highlight late payment and its impact:-

General

Revise your cashflow to monitor the effect of late payment. What impact does this have on future working capital requirements? Use the planning/cashflow/projection software to highlight the work in progress and to avoid losing control of the business Use planning/cashflow/projection software to highlight and stop overtrading and/or unprofitable trading

Paying

1. Use aged creditors to highlight when your creditors need paying
2. Record any interest paid on late payment to monitor the cost
3. Keep a record of creditor days
4. Keep track of key suppliers (maintain relationship, speed of supply and prices) - this impacts on inventory, creditors, (working capital)

Receiving

1. Use aged debtors to highlight when money may be received
2. Record any interest received
3. Set credit limits and review these for any late payers
4. Keep a record of debtor days
5. Flag any overdue debtor and put a stop on the account
6. Keep track of key debtors/customers (review trading patterns)
7. Investigate any unpaid invoice from a batch or any dispute quickly