Cashflow Management Package

The Cashflow Management Package incorporates commentary on the following areas:

  • Work in Progress
  • Stock Systems
  • Creditors
  • Cashflow Management Overview
  • Debtors’ Discounting and Factoring
  • Debtors’ Insurance
  • Cashflow Cycle Charts
  • Key Performance Indicators – Ratios for Cashflow

“There is a Market for Accountants to Offer Cashflow Management Advice”

At the Australian Technology Showcase for Accountants (ATSA) Conference in October 2014, the Second Commissioner of the Australian Taxation Office, Geoff Leeper made this statement – “there’s a market for accountants to offer cashflow management advice”.

What did Mr Leeper mean in this comment? After all, he made this comment as part of his overview of the effect of the introduction of Standard Business Reporting (SBR) by the ATO. Mr Leeper indicated at that conference that the ATO had guaranteed the productivity commission a “red tape reduction” of, at least, $500 million per annum from the SBR process.

This is a substantial amount of money that Mr Leeper indicated that accountants could replace in their fee mix with cashflow management advice. What’s included?

Debtors are a huge problem for a large number of small businesses in Australia. Unfortunately, Australia has the dubious title of having the “longest debtors’ days outstanding in the world”. This “award” was bestowed on Australia following a review of debtors’ days outstanding in over 80 countries by a UK organisation. This international review indicated that Australia’s debtors’ days outstanding was 56.4 days. This means that many small/medium enterprises have debtors’ days outstanding for more than 90 or 100 days.

There is a potential opportunity for accounting firms to conduct debtors’ reviews for your small/medium enterprise clients, to see what improvements can be made in the debtors’ days outstanding figure. Items to be checked would include:

  • Does your client utilise a credit application form? Is it checked?
  • Are directors’ guarantees received from directors of private companies that want to transact business with your client?
  • Is consideration given to the Personal Property Securities Act (PPSA) and the potential benefits from registering various transactions on the Personal Property Securities Register (PPSR)?
  • Is a letter sent to a new customer confirming the terms of trade?
  • Does your client promptly issue invoices to their customers and implement follow-up procedures?
  • Is an online debt management system being utilised which will generate reminder letters and SMS messages to encourage customers to pay their debts promptly?
  • Is there a formal system to try to plan a debtors’ reduction strategy from one month to the next, to try to ensure an overall improvement in the debtors’ management system?

Some of the other areas that accountants could review, as part of the implementation of cashflow management advice for your clients as a major initiative as proposed by Mr Leeper, could include:

  • Review of your client’s work in progress system – is it functioning satisfactorily? – are jobs being finalised promptly?
  • If the business is holding stock for resale, has an appropriate stock system been implemented that assists in minimising the investment that the business needs to have in stock?
  • Does your client understand the cashflow cycles that apply to their business?

These are some of the issues that accountants could implement to fulfil Mr Leeper’s prediction that accountants could earn substantial fees from cashflow advice to replace the fees that the Australian Taxation Office is very confident accountants are going to lose from the ongoing changes being implemented by the ATO.