Not Collecting Your Debts

Calculate a ratio of Debtors / Income for two points in time (say a year apart).
This will give you something you can compare.

Year 1 – Debtors $100 / Income $1,000 = 10%
Year 2 – Debtors $230 / Income $1,500 = 15%
Your debtors compared to income is higher in Year 2 (by 5%)
You are getting worse at collecting.

Doing this measurement once a year is not a very good check.
That 1 month might have been a freak event.
Do this each month or quarter so you can see if it is trending in a better or worse direction.
Add this to your critical metrics spread sheet, discussed under “Necessary Metrics”, below.

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