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Maximising your accounts receivable

Posted on February 16, 2018 by admin

Freeing up working capital can help businesses fund growth, reduce debt levels and lower costs. One way to improve working capital is by managing your accounts receivable.

Many businesses fall into the trap of poor accounts receivable management, for various reasons from extending credit to customers, to ignoring payments terms to guarantee a new sale. These behaviours and behaviours like these can quickly cause disastrous effects on your cash flow.

There are a number of strategies you can practice to improve your accounts receivable process, including:

Customer credit approval policies

One great strategy is to create a clear customer credit approval policy before entering into any business deals with a customer. By assigning credit limits, payment terms, discounts and return policies to specific customers, you are protecting yourself from getting caught out. Introduce a system to determine a new customer’s creditworthiness, such as background and credit history checks.

Criteria for approving or rejecting requests for credit

Reviewing your credit approval process is an essential component of business, as a customer’s financial situation may cause a change to warranting a reviewal of their credit terms.

Sound invoicing procedure

One of the necessary strategies to maximise accounts receivable is to establish a solid invoicing and billing procedure, as generating timely invoices is a major aspect of collecting account receivables on time. Do your research and create a strategy that works best logistically for your business; perhaps it includes a staff member taking on this role, or perhaps you will look for automated options. Sending electronic invoices is ideal as it fast tracks the process due to reduced delivery time.

Efficient collection process

Developing a collection process for all staff to follow will increase efficiency, ultimately resulting in improved management of accounts receivable. You can do this by training all staff on the necessary process for collecting money owed, and train them in how to deal with difficult or non-compliant customers. They should be aware of how to apply discounts, how to negotiate payment plans, and how these aspects should be sufficiently documented.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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