Most practitioners would support their clients in setting up and maintaining rigorous credit control systems and yet may be far less strident when collecting hard-earned fees from clients.

COVID restrictions make it even more important that firms tackle this issue head-on.

The cumulative funding required to finance work-in-progress and debtors is a major issue. There is a tendency to see these current assets as a bank account – as an asset that will be converted into cash in the not too distant future.

The problem is that this working capital has to be funded. Commonly, by an overdraft, discounting arrangement or by restricting partners’ drawings.

Converting work in progress into invoiced fees can be accommodated by agreement with clients: billing as payments on account for example.

Additionally, there are a further range of options to speed up the collection of fees. Two key options are:

1. Set up a monthly payment plan to recover fees or
2. Set up online direct debit mandates so that you can collect monies due rather than pester clients to pay. This has the added advantage that it can accommodate a collection of variable amounts. There are a number of companies that provide this service unattached to High Street banks.

If you have side-lined this issue in order to cope with other COVID related disruption, now may be a good time to take a hard look at work in progress and debtors and take action to reduce pressure on work in progress funding.

Source: New feed