8 June 2001


Doing the work is one thing,

getting paid for it promptly

can be quite another.

Peter Hill reports on a

positive approach to

invoicing and credit control

CASH flow is the life blood of any business and it can only be maintained through a disciplined approach to the collection of debts, according to Gary Short of Shorts Services.

But contractors can be their own worst enemies when it comes to collecting payment for work done.

Jobs accumulating for weeks before customers are invoiced, invoices poorly set out and lacking detail, tardy mailing of statements and a reluctance to chase overdue accounts all add up to inconsistent cash flow, disputes arising long after memories have faded and an impression that all but invites customers to delay putting pen to cheque book.

Not that it is easy for the small to medium-size contractor, the man who must spend his days driving the tractor or forage harvester. With little time spare for business administration and little inclination to tackle such tasks at the height of a frantic silaging or muck spreading season, things can easily slip.

But business administration in general, and invoicing/credit management in particular, are crucial elements of a successful business, says Mr Short.

Shorts Services provides agricultural, construction, waste management and plant hire services from its base in Ascot, Berks. It is big enough to employ administrative staff and allow Mr Short to concentrate on management.

Work record

"Whatever the size of business, you must have a system that allows an up-to-date record of work to be kept and invoices and statements to be produced promptly."

At Shorts Services, charging customers is made easier by using a Sum-It – a computer-based accounts package with a diary that can be used to generate invoices (Contractor Update 13 Apr 2001).

Apart from helping with day-to-day administration, the program provides easily-accessed records of past work and charges and when billing will accurately work out the VAT every time.

Shorts Services also uses the program to generate estimates and accepted orders for agricultural operations, which then form the basis of future invoices. With essential details, such as the agreed rate already entered, it is then just a matter of completing entries with confirmation of work done, such as the number of bales produced and any materials used, then printing off the finished invoice.

"This information comes from the job sheets completed by each operator which require a note of any materials drawn, such as bale wrap or silage additive, as well as the work done and start/finish times," says Mr Short. "I look at these once or twice a week, adding to the computer event records as necessary so that invoices can be produced and posted weekly."

To those who consider monthly invoicing a frequent enough chore, Mr Short asks: "Why sit on a bill until the end of the month?"

It costs little more to send out invoices more frequently, they get into the customers system earlier and prompt invoicing invites any queries to be raised while jobs are fresh in everyones memory, he says.

Image of efficiency

"I also think it shows we have a determined, business-like attitude to what we do. It adds to the image of efficiency," Mr Short says.

There is a psychological element to prompt billing, too, in as much as a series of timely invoices avoids the pain that one big bill can inflict. Busy contractors often end up waiting until large blocks of work have been completed, perhaps a seasons first, second and third cut silage, before putting the all-important bill in the post.

Some customers may prefer it that way. But it is a rather stark reminder to the client of just how much cash he is paying out.

"Nor does it do business cash flow any good and a small query can hold up a vast volume of money," says Mr Short. "Our approach is always to invoice as soon as the work is done and to invoice separately for different jobs, even though they may be done at around the same time."

Three invoices

A farm on which late maize drilling has taken place in the same week as grass has been baled and wrapped, and the first silage cut for the clamp has been taken, will get three invoices giving individual details of each job.

"It keeps each invoice within a more comfortable size and makes them clear to read," says Mr Short. "And if there is a query on one job, it is no reason to hold up payment on the others."

This approach also extends to the introduction of credit card payment facilities for irregular, usually non-farming, customers who want a trailer-load of hay or their pony paddocks topped.

"We take the credit card number when the job is booked and process payment when it has been completed. We dont want to be sending out and chasing a lot of small invoices."

Credit control begins with invoice terms that require payment typically within 30 to 45 days, and a monthly statement setting out payments received and due.

"After that, its a telephone call to remind customers with overdue accounts, followed by a letter," adds Mr Short. "If we still do not get paid, a debt collecting solicitor we use provides a quick, efficient and inexpensive service that usually does the trick with minimum consultation and cost."

Personal skills

Within this process, of course, personal skills come to the fore in determining why payment is overdue. If it is because of genuine difficulties rather than simply unwillingness to pay, Mr Short attempts to find a way of collecting the debt sensitively without antagonising a customer whose business may still be welcome in future.

"We have successfully negotiated payment plans which have enabled customers to pay off debts over a period of time and we are seeing some interest in setting up this sort of arrangement before work is done to help spread payments in line with the customers cash flow.

"This may involve some payment upfront as well as in arrears." &#42

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