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Tis the season to be collecting falalalala….. That’s right, you need to drop what you are doing and get out there and collect your money. If you don’t collect it before Christmas you can count on waiting until Paddy’s Day. There is something about the season of goodwill that encourages people to settle up before the big day. Maybe its a deep down fear of the ‘naughty or nice’ list, but whatever it is, you need to capitalise on it. Read on for a general collections guide and avoid the no 1 cause of small business bankruptcy - not collecting money!

5 Point collections Guide:

1. Send the Invoice!
(eaten cake is soon forgotten)

Send out invoices as soon as possible – this sounds obvious but just consider that most of your clients will take at least 30 days to pay from the date they receive the invoice. If you completed the work in September but don’t invoice until October then it is at least November before you get paid. If you have had to pay upfront for materials then you are drastically reducing your profit margins, especially if you are incurring overdraft charges at the bank. And most importantly, you want to get your invoice in quickly while the benefit of your service is fresh in your client’s mind.

Action: Schedule a weekly appointment in your diary with yourself (or your bookkeeper) and do your invoicing.
Tip: Post your invoices on Thursday to arrive at your customers on Friday - businesses often have the chequebook out on a Friday to write wages cheques so you might get lucky.

2. Follow-up with Customer Statements on the first of every month.
(the squeaky wheel gets the grease)

If you send an invoice only and the customer never hears from you again what do you think are the chances of you getting paid? In 40% of cases a prompt invoice is all you need to send. What are you going to do about the other 60%? You need to send out customer statements on the 1^st of every month. A customer statement needs to contain a list of:

• All the invoices you have sent out to the customer.
• The money (if any) you have received from the customer.
• The total outstanding.

Ideally, statements should also include an aged analysis – how long are the amounts outstanding – 30 days, 60 days, 90 days, plus 90 etc.

Action: Schedule time in your diary once a month to review the customers that still owe you money and send out your statements.

Tip: A computer makes this process much simpler – see point 4.

3. Still no money?

Every month see who is late paying by 60-90 days.

Action: Schedule a monthly appointment to telephone and/or visit the very late payers.
Tip: Before you pick up the phone or visit make sure that you have all the information necessary to field stalling tactics such as:

What was the invoice number? What was that invoice for? That’s never 30 days old already? Can you fax me a copy of the invoice?

You need to be able to respond immediately to all of these questions to avoid further delays.

4. Computerise your bookkeeping

Books are boring and soul-destroying but as you are self-employed just get the training and the help you need and just do it. No business is too small to benefit from the efficiency computerised bookkeeping can provide. Make a resolution to get on top of your collections and keep your bank account firmly in the black.

Action: Book a class as soon as possible.

So in summary, go through the proper channels:

• Invoice
• Customer Statements
• Telephone call
• Visit if necessary

5. It’s Christmas - the best time to collect your money- get out and do it!

For a free trial of SortMyBooks to sort out your collections, go to www.sortmybooks.com - Get sorted for the New Year!

From SortMyBooks: www.sortmybooks.com 

The Revenue Commissioners have made another change to the VAT – do you know that this is the 3^rd change within 18 months?? Firstly they changed the VAT periods from being 2 months to being either 2 months, 4 months or 6 months, then they brought in new rules for sub-contractors and principal contractors which mostly impact the construction industry and now they have changed the VAT rate from 21% to 21.5%.

The timing of this is a little odd in that the Revenue normally give us some time to implement changes but in this case they’ve pushed it through halfway through a VAT period which suggests they’ve done it deliberately to cash in on the Christmas season.

Read on to see how the change in the VAT rate affects your business:

VAT Registered and selling exclusively to businesses

Anything you have been selling at 21% is going to go up because you now need to charge 21.5%. If you usually quote VAT exclusive prices then all you need to do is start charging VAT on your sales invoices at 21.5% from 1^st December. Download the SortMyBooks upgrade and from 1^st December start using the 21.5% VAT rate.

VAT Registered but do not sell anything at 21%

You do not need to do anything to your prices but you are going to start being charged 21.5% by your suppliers from 1^st December so you need to download the new VAT Rates file so that you are reclaiming the correct amount of VAT.

VAT Registered and selling to consumers

You are going to have the most work to do because you have to raise your prices now in time for 1^st December 2008. Everything that you sell currently at 21% is going to have to be increased to include 21.5% VAT. See the example below:

If your till is programmed to calculate the VAT then you’re going to have to change those rates to 21.5% also. Download the SortMyBooks upgrade so that you are reporting and reclaiming the correct amount of VAT.

I am on cash receipts basis for VAT does this mean I now have to pay over 21.5% even though I only invoiced at 21%?
No. You sent out your invoice at 21% so your customer will reclaim only 21% therefore you are entitled to pay over that VAT at 21%. If you are using the Lodgments Wizzard in SortMyBooks then it will be handled automatically for you. If you are using the All Lodgments Bookkeeper then choose the same VAT rate that you sent the invoice out as. If in doubt about how to handle it for your own business then please get clarification from the Revenue Commissioners. Here is the quote from page 92 of their VAT guide ‘A trader who has been authorized to account on the moneys received basis is liable for VAT at the rate applicable at the time the goods or services are supplied and not at the rate applicable when payment is received.’ http://www.revenue.ie/leaflets/vatguide_2008.pdf 
 

Other things to consider:

If you have printed price lists around the place then remember to change those also.

If you are using spreadsheets to calculate pricing and margins remember to change any of those formulas for the 21.5%.

From SortMyBooks: www.sortmybooks.com