Getting paid: collections as a process, not a personality

Ask a leadership team why debtor days are sixty-eight against payment terms of thirty and you will hear about the customers. They are large, they are slow, their procurement is difficult, everyone in the sector pays late. Some of that is true. Most of the gap, in our experience, sits inside the business rather than outside it.

The arithmetic is worth stating plainly. A business turning over thirty million with sixty-eight debtor days has roughly five and a half million tied up in receivables. Getting to forty-five days releases something close to one and a half million in cash, permanently, without a single new customer or a pound of additional margin. There is no other project available to a finance function with that return on effort.

The problem usually starts before the invoice

Most late payments are not refusals. They are invoices the customer cannot process: no purchase order number, the wrong entity, sent to an individual who has left rather than to an accounts payable address, missing the timesheet or milestone evidence the contract requires, or issued three weeks after the work was done. Every one of those is an own goal, and together they are usually the largest single component of the gap.

• Agree the billing mechanics at contract stage: entity, address, purchase order requirement, supporting documentation, portal if there is one.
• Invoice on a fixed cycle and hold to it. Slipping the run by a week slips the cash by a month.
• Check the invoice will be processable before it is sent, rather than finding out on day forty-five.
• Give customers a way to pay that does not require effort: direct debit, card, or a payment link on the invoice itself.

Then run a ladder, on a calendar

Collections works when it is a defined sequence that happens whether or not anyone feels like doing it. A courtesy check a few days before due date to confirm the invoice is approved and scheduled. A reminder on the due date. A call, not an email, at day seven. Escalation to the account owner at day fourteen. Escalation to a commercial conversation at day thirty. A stop on further work, agreed in advance with leadership, at a defined point.

The specific days matter less than the fact that they are written down, automated where possible, and followed. Most of the businesses we work with have a version of this in someone's head. Turning it into a rota with named owners and a weekly review typically moves debtor days by two weeks within a quarter.

Make it visible and make it owned

The aged debt report belongs in the weekly leadership meeting alongside the cash forecast, not buried in the month-end pack. Anything over sixty days should have a name, a date, and a next action against it. Where a debt is disputed, that should be recorded as a dispute with an owner in operations or sales, because a dispute is a delivery problem that finance cannot solve by sending another statement.

It also helps to stop treating collections as an unpleasant task that falls to whoever is most persistent. It is a process with a measurable return, and the person running it should be resourced, trained, and backed by leadership when a stop on work is the right answer.

The other side of the ledger

Working capital is not only about receivables. Supplier terms are negotiable far more often than businesses assume, particularly with suppliers who have grown alongside you and would rather extend terms than lose the account. Paying early for no discount is lending money at zero per cent. Review the payment run policy, take early settlement discounts only when the implied annual rate beats your cost of capital, and stop paying in advance of terms out of habit.