Record keeping, also known as records management or records and information management, is an organisational function focused on the management of financial records throughout the entire lifecycle of a business. No matter the size of the organisation, big or small, maintaining financial records is imperative to make sure not only all your financial information is accurate to facilitate your tax obligations, but to also make sure you have a finger on the pulse in terms of how your business is actually performing.
Cash flow is the lifeblood for all businesses, and one of the most important functions of record keeping is maintaining an accurate ledger of your account’s payables and receivables – as its these two (2) accounts that essentially dictate a company’s cash flow and impact the ability to operate day-to-day. If you are paying (account payable) more money that what you’re collecting (accounts receivable), you may want to review your overall situation, however the first place to look may be your invoices to clients to get an understanding on when, how and if they are paying on time or in-line with your credit/ or invoicing terms.
Managing slow payers is quite an exhaustive and stressful process and those who have experienced this, know well how hectic and draining it can be without accurate and relevant information regarding the debt being collected. It can become costly to recover the data and sometimes you lose it without even knowing it – whether this is via upgrading to new platforms or software without migrating legacy information over, or just a lack of record keeping in the first place.
So why is record keeping important for collecting outstanding invoices from your customers?
Knowing what invoices have been sent to customers and when they fall due is an important part of the collection process. More importantly, if your financial records aren’t in order and up-to-date, will severely impact your ability to track payments and slow payers effectively. It is for this reason that your financial controller or book keeper needs to make sure all financial records are accurate, especially if you decide to chase customers for payment – as this could impact relationships.
Clear financial records is obviously important to support an effective and efficient collection process, however it’s also crucial to make sure all customer information is up to date also – whether this is the best stakeholder to send invoice to or initiate payments.
Below we have outlined why accurate financial record keeping is crucial to not only debt recovery, but also to benefit of the business overall in order to make better informed decisions – whether this is investments in human resources or perhaps simply just diversifying portfolio.
- You can track and monitor unpaid debts. With good records, you can easily get the information you need to go after the debtor with unpaid debts.
- You are able to prioritize. Having a good record system allows the debt collector to prioritize their debt collection efforts.
- You can determine statute-barred debts. Having good records helps debt collectors to see the time debt has remained unsettled, the efforts that have been made and file them separately from other recoverable debts.
- With good record keeping systems, it becomes easy to resolve disputes with the debtor since every contact and transaction has been recorded.
- It saves time that would otherwise be used in tracing contracts and receipts.
- In case of a court case, good records help you in your case since you can show all efforts made towards the recovery process and how the debtor responded to these efforts.
- It ensures transparency and facilitates clear auditing of any business.
Looking specifically at debt collection, the Australia debt collection guidelines which are set down and monitored by the Australian Security and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC), specifically highlight and stress the need for companies to maintain good record keeping to help facilitate the process of professional and ethical debt collection practices, as this reduces wrongful collection situations and improves accuracy of information when collecting bad debt from slow payers
About the Author
Local Recoveries Group is one of Australia’s leading debt collection and recovery specialists. With extensive experience as an industry leader in debt recovery and slow payer management, they have built a reputation as one of the best debt collectors for enterprises of all sizes. Servicing businesses from all sectors, they provide specialised debt collection sydney and slow payer management services to businesses across Australia, New Zealand and United States of America..