Besides getting an increase in sales volume and sustained growth, one of the keys to success in business is on optimizing the operating cycle, and this can easily be achieved by improving one of their key stages: collection period customers. The collection period for customers is the period it takes to get the collection of sales. The latter period is where the direction of the company and the credit manager should influence to expedite the return of funds invested.
Considering that most companies usually perform most of their sales on credit, prompt payment of invoices at maturity is vital for the viability of any company to grant deferred payments to their customers.
First to collect first we must optimize the billing process, because if it fails, the recovery of operations may suffer unnecessary delays.
The bill is a very important document and should be issued with greater precision, clarity and accuracy. Any error in the preparation of the bill is a billing problem. The invoice must include any data that requires legislation and also the requesting client. The bill has to have a tax VAT due.
Do not forget that inefficiencies in billing service is one of the factors causing further delays in the collection process.The quality of turnover is key to avoid collection problems.
A very important point is to determine the maturity of the bill, generally the collection period is usually calculated from the date of invoice or sometimes start date of calculation may be the delivery of goods or the shipment. Sometimes it can also be the date of receipt and validation of goods by the customer or the date of receipt of the invoice, although in these cases the conditions are less favorable for the provider as beyond their control and therefore clearly benefit the buyer.
Companies should be aware that there are many factors that determine the maturity of bills, among them are:
The term credit to the customer.
The date for calculating the credit.
All these factors influence the due date of the invoice, so that the supplier must review each and try to get the most favorable conditions.
Also agreed upon payment terms is necessary to determine clearly the fixing of the payment period granted to the customer. The repayment term should be clear on the invoice avoiding confusing, ambiguous or leave the determination of the hands of the customer due expressions.
Avoid ambiguities or gaps in the invoice.
Always avoid ambiguous or indeterminate expressions, for instance "many days ahead," "I told commercial", "working day" "make ends meet", "pay for replacement".
No customer to accept conditions that are questionable such as "payday first Friday of every month," because if the first Friday of the month is a holiday the customer can delay payment a month.
It is also desirable to determine if the client practices increasingly widespread bad habit of not accepting the payment of bills maturing in August alleging summer holidays, instead passing orders continue throughout the summer. The same should be clarified regarding payments due in late December, since many companies fail to pay bills from December 15.
It is also dangerous for a customer to place on their payment terms: "provider payment only on 30" because this allows him to avoid paying the 28 February and postponed a month payments due in February.
And we must also evade conditions as "payment within 60 days of receipt of invoice" or "payment within 60 days of receipt and validation of the order" which are discretionary and allow the customer delays payment many more days.
Therefore it is advisable to use terms like "pay to 45 days from invoice date" and note the exact date of payment due on the invoice, as required by company law.
The fixed payment days set by the buyer.
The default customer fixed payment days are another factor that distorts the payment due because the customer does not pay on the theoretical maturity (once the credit period granted has expired) but the day does the same He has predetermined and which may be many days after the original due date.
For this reason many buyers concentrate all their payments in one or two days each month on grounds of organizing their treasuries, when in fact the reason is to get an additional credit.
Therefore the fixed paydays are a technique used by many customers to significantly extend the payment period. Even some companies employ the stratagem of placing the order on nearby payday dates have imposed their suppliers, the purpose of the payment due of the invoice has a more distant date and thus get a extraordinary delay.
For example, an enterprise enters into with a supplier a deferment of 60 days but imposes a single payday; the 5th of each month. The purchasing company intentionally passes the request to the supplier on March 2. The supplier can deliver the product on March 7 and bill the same day. The theoretical maturity of the bill would be May 7, but as the customer has a fixed payment day is the 5th of each month, the provider may not charge the bill until June 5th. With this trick the customer will have gotten extra funding for 29 days and you will pay the bill for 89 days.
The system of imposing a payday month -or few days payment- hurts the supplier because when the client has only one payday per month, this implies an average delay of 15 days in the payment of invoices. When the buyer has 2 days of payment per month the average delay experienced by the supplier is 7.5 days and when you have three days of monthly payment delay is 5 days. And if the customer has 1 payday week delay is only 3 days.
The importance of the issue date of the invoice.
Another factor that influences the maturity of the bill is the starting day of reckoning for the collection period since the week as the day is taken as the starting date of the calculation may fall on Sunday due date. There are predetermined based on the term of payment and the day counter starts rules; for example if you take a Monday as first day of the computation and payment deadline is 90 days, the due date will be Sunday.
If the payment period is 60 days and billed on a Wednesday, the payment due will also fall on a Sunday. And if the payment period is 30 days and billed on a Friday, maturity will also be a Sunday.
Therefore we must avoid bill for collection period 90 days on Mondays, for terms to 60 days on Wednesdays and deadlines to 30 days on Fridays since the payment due will always be a Sunday and the collection will be delayed one day.
Best use days and months in the computation.
Nor is the same state the collection period in days to do it in months since not all months have 30 days. For example an invoice dated June 5 with a payment period of 90 days expires on September 3, if we indicate three months expires on September 5, or lose two days.
Postfacturación or pre-invoicing.
The use by the supplier of a system postfacturación or pre-invoicing is crucial since a system postfacturación losing days ago in collection instead one of pre-invoicing allows winning days. However each of the aforementioned systems has its advantages and disadvantages.
The advantage of using a pre-invoicing system is that there will be lengthening the cycle of charges for delays in issuing invoices.
But there will be a drawback that the company should be very punctual delivery, orders must serve flawlessly and follow all the requirements requested by the customer. With this billing system can not exist problems in collecting orders or deliveries of products.
The pre-invoicing does not work if commercial litigation relating to real served, or when the client does not accept the goods invoiced after delivery appear.
Nor is it advisable to use the pre-invoicing when the client has a term of acceptance or compliance review of the order.
The advantages of the system are postfacturación: errors are avoided in making bad bills collected orders, deliveries incidents and problems are avoided bill rejected orders after delivery.
The main drawback of the postfacturación is its reliance on another document: the delivery note. If you arrive late delivery note, invoice will be issued with an unnecessary delay.
The postfacturación also has the disadvantage that if billed on a pooled basis deliveries for a certain period of time (1 week, 15 days, 1 month) banding multiple invoices and then issue a single invoice, the supplier still grants within Extra credit to the buyer. This is so because usually the date of the last day of the period of supplies (the date corresponding to the last installment) as a basis to start calculating the period of payment of invoices pooling is used. With this system the customer will benefit from more time to pay the first purchases.
In these cases you have to negotiate with the client to compute the date of commencement of the period by the weighted average of deadlines to thereby establish an average date of collection.
The reception of the delivery note (refer or delivery note) validated.
From the delivery of the goods starts counting the collection period, so if using post-billing systems, it is vital that the invoices arrive as soon as possible to client management to issue invoices.
It is a priority to avoid withholding delivery notes in the delivery circuit board.
In many cases the invoices take several days to get what produces unnecessary delays in the preparation of invoices.
This practice causes the existence of pockets of hidden risk because during the time it takes to get the invoices are not only giving days free credit to customers, but that consignments of credit sales are not counted by not been issued yet invoices.
The invoices must be sent by a duct that does not cause distortions in reading, for example if sent by fax to ensure that the reproduction is good enough to avoid errors caused by words, numbers or letters difficult to read arise.
The preparation of the bill.
The bill is one of the key documents of commercial transactions and billing is one of the most important to the business operations.
It is essential that billing is done as soon as possible, prioritizing bills largest amount, any delay in issuing an invoice involves credit granting additional days at no cost to the customer.
A good computer system expedites billing, but not the entire billing process depends on computerization.
In companies that use pre-billing systems the problem of dependence on the packing slip for the issuance of invoices is solved as bills are automatically issued with the invoices.
However the pre-billing also has certain drawbacks, especially if the company takes to fulfill orders as customers refused to accept the invoice date.
When using a system of post-billing consider that in many cases are being given additional time to credit the customer, since the invoice date is usually the day is billed, not the day receipt of the goods at the customer's warehouse.
Some customers only authorized as expiration dates to get the day its procurement validate the receipt of the goods, and from this date the provider must issue an invoice, which will force a few days give credit to the customer.
Sending the invoice to the customer.
It is no use a system of fast and accurate billing if the distribution of invoices promptly to their recipients.
The company should have a good system of sharing and giving a special distribution of large amounts bills, whether by express mail or courier treatment.
As a general rule once issued invoices must leave office immediately supplier and sent to the correct address of buyer's payment.
It is appropriate to update the addresses for sending invoices and check invoices errors returned by postal address.
It is advisable that all invoices clearly indicating the name of the responsible customer management of the supplier and direct contact phone and even your personal email, with the express mention that in case of disagreement or need for clarification, the Guests must contact as soon as possible with that responsibility.
Sending the invoice to the customer.
It is appropriate to adopt a pro-active policy in controlling sending invoices to customers, and especially from certain importes- is advisable to contact the person responsible for accepting the order and give the orders.
In any case it is convenient to customize the management and verify that the client has given validity to the bill, it is entirely correct and confirm your payment at maturity.
If the bill is not correct for the customer, the supplier has sufficient lead time to correct errors on your bill and resolve potential trade conflicts.
Ultimately it is important that companies have always sell well and it is charged to charge it is selling better.