SMEs can improve cash flow even when times are tight

Softline Pastel's new Cash Manager module makes it easier for small and medium-sized enterprises (SMEs) to collect debts - improving cash flow in spite of the tough economic climate.

So says Steven Cohen, Softline Pastel managing director. “According to the 2007 SME Survey, cash flow and debtors are SMEs' biggest nightmares after crime. That's mostly because, for every R100 000 of overdue invoices, you pay R15 000 per annum in interest alone.

“Even with that knowledge, however, organisations have a tendency to believe that if their debtors staff are busy with their day-to-day activities - such as reconciliations, management reports, cash flow forecasts, and digging for paperwork - there's nothing more they can do to shorten debtor days and make collections easier.

“Actually, they can - by putting computers rather than humans to work. If you use a system that keeps your accounts clean and automates your collections processes, then you free up time for your debtors staff to proactively collect your outstanding invoices.

”Cash Manager enables that - by allowing you to manage your debtors and cash on a daily, extremely practical, forward-looking basis.”

Pastel Cash Manager, an add-on module launched with the 2009 Pastel Accounting upgrade, is a debtor's management system that brings order to a debtor's book by tracking all overdue invoices. The system tells you why they're outstanding, what actions have been taken to collect them, and what the expected date of payment is. It automatically e-mails a clean list of overdue invoices to the customer and diminishes the risk of non-collectible debt and associated write-offs.

“Having a system like this in place means you can pay attention to your debtors themselves rather than focusing mostly on the paperwork generated around debtors,” Cohen says. “For instance, debtors always give reasons (or excuses) for non-payment. Cash Manager allows you to keep track of all the stories rather than your employees having to scribble cryptic clues on the Age Analysis in the hope that they'll be able to figure them out later.

“It then categorises the reasons, so that you can identify and quantify them and take relevant action to remedy them. Reasons for non-payment can range from poor debtor behaviour to poor service delivery and poor internal administrative procedures. In other words, the problem could be your company, not the debtor - and you might need to fix your internal processes before you confront the debtor.”

You can also print an accurate collections forecast based on individual invoices and their related “promise to pay dates”. So instead of applying general customer terms dates - you can manage your cash flow far more accurately and update it as situations change - especially relevant to today's difficult environment.

Cohen says that, when Pastel designed Cash Manager, its developers ensured it would support debtors collection best practice, enabling organisations to automatically optimise their debtors management. “If you use all the functionality Cash Manager gives you, you'll inherently be managing your debtors to the advantage of your company.

“For example, Cash Manager enables you to track all promises to pay. So, when you call the debtor - as you should frequently because the rule is that the person who phones most gets paid first - extract a promise to pay date and input it to Cash Manager. Then the system tells you when to follow up, ensuring that nothing falls through the cracks.

“Cash Manager also provides vital continuity within the debtors department, enabling other staff to take over if the debtors' person is on leave or resigns.

”And, best practice calls for you to see beyond the mere aging of the book because average days outstanding ratios can hide a lot of important detail. Cash Manager gives you that visibility.

“On the other hand, if your debtor's book is large, it may be impossible to call each debtor. That's when you need a system like Cash Manager that compiles lists of overdue invoices and e-mails them to debtors.”