So why do many firms not take corrective measures to reduce their debtors? Below, with no punches pulled, are the main reasons that cause firms to endure high debtors:
Denial – We don’t have a problem with debtors!
I even hear this phrase from senior partners in the largest firms. Yes – firms that give clients credit terms of 7 days and yet their debtor days are over 60 – many are over 70! So why the denial? Well, because these partners are (usually) established, intelligent and wealthy professionals and they simply don’t care, or more exactly, don’t need to care about when debtors pay. The result is … high debtors.
Failure – to advice or to act!
A sad consequence of being held (deservedly) in high regard as problem solvers is that many professional advisors fail to ask for expert advice with their own business challenges. Additionally, even if they get advice they then regularly fail to implement it. To compound things firms then sabotage their chances of success by not allocating sufficient resources. The result of failing to get advice, implement it or resourcing your firm to improve debtor performance is … high debtors.
Apathy – It’s always been like that!
Addressing high debtors in any sized firm is a complex & nuanced task that requires boundless energy, untold diplomacy and most challenging of all… implementing CHANGE. Many firms don’t have an appetite to tackle this if there is no immediate cash flow pain. The result is … high debtors.
The good news is that with some honesty, support and encouragement (internal & external) all the above issues can be overcome. Rather than be resigned to accept slow payments your firm’s debtor performance is something you can pro-actively control. To get motivated for this journey, firms should focus on the immediate cash flow gains they could make. Then reach out to us for some guidance.