Auditor's advice: The road to better financial management

Every year, more than 5,000 Danish companies go bankrupt, and in the vast majority of cases there is one overriding reason: lack of liquidity.

There are many reasons for a lack of liquidity. Unfortunately, we see all too often that the lack of liquidity is due to poor or non-existent financial management. Many companies forget to send out invoices for work sold and fail to follow up on invoices that are not paid on time.

Whatever the reason for the lack of liquidity, your company should do everything possible to avoid financial challenges being caused by a lack of or poor financial management.

At Collectia, we have asked our accountant and financial advisor what his advice is for better management of the company's finances in everyday life - also called financial management.

1. Remember to invoice

It may sound simple, but many people focus far too little on getting invoiced for their tasks - and not least on sending their invoices in good time - and with the right amounts. Because if you are self-employed, there are often many other things that also need to be taken care of. And then the invoicing can wait until the weekend...

We recommend that you determine what an invoice should contain immediately after the work is done - and invoice immediately.

The longer it takes to send your invoice - the longer it takes for the money to appear in your account.

2. Remember to follow up

The word alone makes most self-employed people and entrepreneurs bored. Following up on payments can often be both tedious and cumbersome - if the customer hasn't paid on time.

If, like most people, you hate having to check whether a payment has gone through and then sending reminders, collection no tices or having to call the debtor - well, don't worry.

Fortunately, there are many good options, such as Collectia, which in addition to being a debt collection company - can also help you reminder service; if the payment fails. If the customer does not respond to the reminder letters, Collectia can also automatically help you move on to the actual debt collection process.

3. Set up procedures - and stick to them

Few self-employed people have few or no procedures in place for their bookkeeping, debtor follow-up and debt collection - and that's a shame!

Because without an established procedure for invoice follow-up, including a reminder procedure, things will often go wrong.

For example, we recommend that you set up procedures for what to do when a customer fails to pay. Should you call? Do you want to send an email? Do you send a reminder? Or do you want to start by sending a debt collection notice?

Basically, there are no right - or wrong - procedures; it depends on your business. The important thing is that you establish procedures for yourself and your bookkeeping - and that you can stick to them.

4. Make it easy for yourself: Use an easy-to-use accounting program that you can grow with

There are a lot of good online accounting programs in Denmark, and among the most commonly used are E-conomic, Dinero, Billy and Dynamics 365 Business Central.

You should find an accounting program that is easy to use - and that your business can grow with - for example, by being able to add apps/plugins as you need them.

Most accounting programs make it very easy for you as an entrepreneur to maintain good financial management; where there is little need to know about debits, credits, balances or profit and loss statements.

Many accounting programs and ERP systems have the ability to connect apps, integrations and plugins - making everything from payroll, inventory management and debt collection easier than ever before.

For example, with Dinero, with just a few clicks, you can automatically send out reminders, debt collection notices - and send your customers to debt collection with Collectia. It is just one function out of many that can make your everyday life and not least financial management - much easier.

Read more about debt collection with Dinero here:

5. Get help if financial management does not interest you

For many entrepreneurs and self-employed people, invoicing, financial management, follow-up, debtor follow-up and debt collection are not topics that interest them very much - and therefore naturally do not take up much time in their daily lives.

... and this can have major consequences - and be dangerous for your company's liquidity.

Our strong recommendation is that you hire a bookkeeper - either on a freelance basis who physically comes to your business - or check if your accountant can offer bookkeeping assistance.

A good bookkeeper can help with all aspects of good financial management; and can help with all the things you don't care about: sending out invoices, follow-up, debt collection - and much more.