Using Software to Track Overdue Accounts

Keeping track of unpaid accounts is a necessity and it does not have to be overly complex.

Matt McFedries — CEO of Debtor Daddy — Explains how to use software to easily account for the debtors of any business.

In this episode, we discuss:

• The Common Mistakes People Make When Accounting
• How to Fix Those Mistakes
• Efficient Accounting Processes

Host: Josh Fonger

Guest: Matt McFedries

Duration: 24:34

Please Note: The following is a computer auto-generated transcript and will include some inaccuracies.

 

Josh  0:00  

Welcome to the Work The System Podcast where we help entrepreneurs make more and work less by managing their systems. And I'm your host, Josh Fonger. Today we have a special guest, we have Matt McFedries. Matt is the co-founder and CEO of Debtor Daddy, and on demand scalable accounts receivable software that revolutionizes business accounting. With a background in digital content management, and web development, Matt now focuses his energy on growing and managing his tech business across Australia, New Zealand, the UK, USA, and beyond. Alright Matt, why don't you give us the backstory and tell us how you became the CEO of Debtor daddy?

 

Matt  0:41  

Sure. Great to be on this podcast and having a chat about this. It's probably an accident that I ended up running a business in the area of accounts receivable. It's certainly a good conversation killer when people ask what I do, like accounts receivable debtors. And they're like, okay, what else you got? But it's a very painful problem. And I experienced it myself in my web design business that I started back in 2009. And I love building websites. I love talking to customers. But I didn't like anything admin related, I was pretty much allergic to bookkeeping, and therefore following up my unpaid invoices. I think like a lot of business owners, I assume people would pay one day. And then, I guess, when I've got invoices that hadn't been paid for, say, six months or more, and I needed the cash. So I started looking a bit more closely at that part of the business. And I still wasn't great at it, like picking up the phone trying to put a system in place, or I had nothing in place, it was just me, some overdue invoices and a telephone and no desire to pick it off. So what I ended up doing, sadly, or crazily was borrowing more money, my internet banking, I could log in that had a slider that I could drag out and just borrow more money. I took that all the way up to the maximum, which is about 30k. And I ended up paying about $600 a month in interest. And that was my, my penalty for really not having a process and hit not having thought about how I was going to manage late payments. Because often when you start a business, you don't really you don't really think about that, right? Everyone's gonna pay, I'm gonna do great work. We all live happily and make money. So yeah, I think the catalyst though, to actually start the business was a conversation with my accountant who was complaining of the same problem. And I'm kind of like a problem solving type kind of guy. And we started to solve it by building some software. And yeah, here we are five years or more down the track and helping thousands of businesses. You know, get it right.

 

Josh  3:03  

It sounds like a great solution to a problem that I know a lot of entrepreneurs have, because who likes doing collection calls, or trying to track down money? So tell us how the software works quickly? Like what does it actually do?

 

Matt  3:18  

Sure. So I guess, the software that does the automation piece. So our process when we talk to any customer is first up, we asked them, What is your current process? Step me through your process when somebody doesn't pay on time. And usually, there's an awkward silence. And they go, wow, there's not really a process. There's no rolls around 14 days past you. We do this for 30 days. And so really the first thing we do is we've got a worksheet we can give people and then we discuss how do you want to communicate with your customers as things become more overdue. And the trick here is actually just see it as customer service. It's not. And this is maybe the mind hack that you know if you can take that away today think about this is customer service, right? And this makes it a whole lot easier. And it's actually one of the foundations on which we built my business Debtor Daddy, because we have people that can pick up the phone. But the reason we can pick up the phone a whole lot sooner, even at seven days, 14 days past you is because it's a customer service call. And that's when we can say you're just trying to get to the bottom of what's gone wrong. Have they got the invoice, was the amount correct, all these kinds of details. So I've kind of diverging from your question, but I guess once we step through those customer service touchpoints every interaction whether it's an email or phone call, as a customer service touchpoint design to get that relationship back on track, and the relationships back on track. Then the cash can normally flow.

 

Josh 5:08  

So why don't you tell us the common mistakes that people make? There's gotta be some common things that they are trying that they have in their own system before they talk to you, that you look out and you're like, wow, you really shouldn't be doing it that way. So what are some common ones?

 

Matt  5:23  

Yeah, sure. So, in an ideal world, I think data is the ambulance at the bottom of a cliff in a way where we're mopping up things gone wrong. We're doing more to build the fence at the top of the cliff, that's where you should be thinking about things. And that actually starts from your quote. So being very clear about what's included in what you're going to deliver, being very clear about when you expect to be paid, and what methods of payment. So it's being very upfront and specific. Some businesses I've seen actually have a separate document, they get people, their customers to sign around payment. It's like, yes, we agreed to pay you in seven days by this method. And so they make it very, very explicit. I think the other mistake is, is probably related to not seeing it as that customer service experience, and that people put off the call because they think it's going to be awkward. And so the key thing is, is to start that process a whole lot sooner, whether it's a friendly email reminder, whether it is that phone call, but having that plan and sticking to it is probably the key thing to get in place.

 

Josh  6:42  

What is it about? Are people afraid to be that clear, because they're afraid they're gonna lose the deal. They're afraid they're gonna lose the client? And they'd rather just say, yeah, we're working to work together? And you said, Yes. And I said, Yes, we'll just get started. Is it that they're afraid to actually show the dollar amount? Show the terms and show the ways to get paid? Is that why they don't do it?

 

Matt  7:03  

Yeah, I think so. And often they are in the terms, you know, buried in the terms of business and not necessarily upfront. What we changed in our quoting process, actually, because you can use some really cool online quoting tools that automate your quotes, we just change it to make sure that the payment terms are in those first few bullet points right out front. And so you are more confident about putting that forward. And in my experience I can totally get the fear of sort of saying, and we expect to be paid because it's all cool when you win the deal, and everyone's happy. And then there's kind of like that moment where it's like, and so you're gonna pay me this on these terms, that does sort of change subtly. But usually, that comes across as being more professional, when you're upfront about it. You know, because it's, it's just good business. And I think your customers will appreciate and respect the fact that you have a solid process and communication and expectations around getting paid. And I guess once you've done that a few times, you start to understand that that's just good business, and people will respect it.

 

Josh  8:17  

Tell me, what is it probably depends on the industry, and maybe even the country and regulations. But what is the standard? protocol between emails, phone calls, text messages, knocks in the door? How are letters? What, what is a normal process? So let's just say that I have, I'll say I'm a dental office, and somebody has a ton of work done. And they want a payment plan, and they're paying cash instead of insurance. And I'll say, as a $6,000, massive mouth overhaul, and they made their first $1,000 payment, and they're gonna make the $1,000 payment a month. And the second month, it doesn't come in. What should happen? 

 

Matt  9:00  

there's no hard and fast rules. I would always say get onto it sooner than later because it actually reflects on your business and your professionalism. So following up very, very quickly, every single time will show the customer that there is no wriggle room. Customers are very good at finding any slack in the system or humans in general, will find out what roles are actually roles and what are very bendable. So ideally, you want to start with an automated reminder. That goes out. Give enough time for reconciling your bank and watching for that payment to come in. So maybe seven days past you have the automated reminder go out, but then don't wait too long. Send out another automated reminder. But then pick up the phone, like it should be very very quick because the way to phrase it would be like well. This is surprising you haven't paid like it's an upgrade. So what's going on, that means you haven't paid. And that's what we're trying to get to get to the bottom of it. So the sooner the better. And if you go on with the customer service mindset of resolving this very unexpected, you didn't pay me issue, right? Then you can start to get that resolution sooner. And often it's, you know, your customers are busy, they've probably got the same challenges that you do, especially if you're selling to small businesses. Time poor, the email inbox is overloaded with invoices, they don't have an accounts payable system to be able to read. You mentally pay their invoices, they've got to do bank transfers, that's quite dire as busy and frantic as us so you can do them. I guess you can really help them out by picking up the phone and going, Hey I'm just here to help. You know, let's get this sorted.

 

Josh  11:03  

Yeah, I've got to leave that nine times out of 10. Or more than that they just forgot to pay or just didn't mean to not pay, or they thought they did pay. And I've got to believe that that's the majority of situations. I won't go into the long story. But Sam, I don't think it's in his book. But he's told me over and over again, that the reason why they have no accounts receivable issue, ect. You might not know it's an answering service. So they have hundreds and hundreds of clients. And they're in their call center. And they'll think they'll send a message in like three days. And then they'll call them at four days and leave a voicemail, they don't answer. And it basically says that if we don't have the money within I think seven days of being late, you're cut off and you get no service. And so like, nobody ever goes past seven days. Yeah. Like he's like, we don't have any weeds. Like we've never had anything past seven days, because then they're not our client anymore. Yeah. And it's, it's like, extreme. But yeah. You know, it works. It works for that industry. And they're all the clients know, hey, if you're gonna, if you're not gonna pay in seven days, you don't get to be a client anymore. Yeah.

 

Matt  12:09  

That's a great example. And I think that works well, when you've got that amount of control, you can switch off Yeah, service. A lot of businesses where it's time and materials, you know, you're a web designer, you're a builder, the, this is probably a key takeaway as well is, leave something back, keep some something on your side that you can hold out and not deliver until you've received that final payment. And it's, it's quite possible to do, you just have to step back and think about it in terms of how you structure your invoices and the timing of your payments. And my web design business, we used to get payments, we'd always save the last 10% you know, to make sure we delivered most of the project, but we would never switch the website live until we got the final 10% paid. And we made that clear from the outset, the other thing you can do is put a stop to work. So part of a good accounts receivable process for a service business, like we work with a lot of accountants. This might not happen till say 60 days past year, that depends on how much cash they're willing to lean to the customer. But we'll have an automated email that goes out and your account has now been placed on stop work. And it goes out as or as an automated email. One advantage of that is that you can then blame your system. You know, so sometimes customers go, ah, you're trading the mean, we had this conversation and you know, we go way back and you shouldn't be so mean to me, you go. I'm sorry. Yeah, that's just our accounts receivable system, it will send you these automated things. Yeah, looks like you have been placed on stop work. So you can still be the good guy, which is great. Blame the system, blame the automation. And I blame me if it's our software. And it gives you a great basis to have that conversation and a positive way.

 

Josh  14:05  

And I think that coming up with the best way to do something and put it into a system prevents the emotional aspect of Well, I know that client has this situation. I know this client has many of you have 50 different stories for 50 different clients, and it confuses what really is just good business practice. What's very, that's great. So, um, what would you say is a Reagan has a success story, if you've got a success story of a company that was not not organized at all, and then they were What was that? What was that? Like for the owner?

 

Matt  14:41  

Yeah, sure. Um, I guess a good one I can think of would be quite a large accounting firm that we were working with. And you might expect that accountants would be really on to it with their money, right. So, but these guys had serious $100,000, that was more than 90 days overdue. And they generally got paid eventually. But I think, you know, the directors were saying won't be nice to have that, you know, 400k in our bank. Yeah, that kind of makes sense, right. So that came to us with that. And effectively we just worked through, these are the systems that we want to follow moving forward, these are the reminders, these are the exact timings in which we will stop work. This is when we pick up the phone. So we designed this, what we call a workflow. And then we started to run it. Now, when you deal with a big large account like that, we actually started focusing on the plus 90, because customers, it could be a bit jarring, you know, just to go, Hey, we want all the money now. So we're just over three months into changing their expectations around now, we do actually want to get paid, we do want to enforce our terms. So that can be a bit of a process. But yeah, it took us probably 90 days, 120 days, but weeds would reduce that by 200k. Just by having good processes, good customer service. And we brought all that back in. And nowadays, you know, they sit close to 100 120k pasture and we're still trying to refine that back just by tuning the system. But you start somewhere. They tune it as you go. And yeah, that that stoked, I mean that they've outsourced the calling process to us as well. So they're their practice manager who's so so busy. Now, that's just one thing completely off their plate. In fact, they've repurposed a staff member into doing some other things in the business, because we were just, you know, 10 times more efficient. So it's been a solid win.

 

Josh  16:47  

I think that's a great, great example, of just people actually what, what is it? So why do people get into that trap? Like, how do they? How do they fall into that trap that they fall into over time? Or do they just have enough cash? And they just don't feel like it's worth it? Or is it an emotional thing? Like, what would you say is the reason why people slide into the situation?

 

Matt  17:07  

A common one is sometimes people are just unaware. And they're not watching that number. Or it's in the back of their minds, you know, they kind of know the overdue amount is creeping up. And maybe they're trusting a person in the business to manage that process. And they kind of believe that it's under control. And this was the case in this accounting firm. But in reality, the person was spending quite a lot of time each week, but was not getting results, kind of maybe banging her head against the same wall doing the same thing, same process that wasn't actually working. And then I guess it just came to the point where someone asked the question, it's like, hang on, what we've put in place is not working. And this is quite common, where the process is actually a person. And we see this it's like it's Bob and accounts or this Jan, you know, the office, a man who's supposed to do this in their spare time, but they're not quite keeping up with it. And, you know, and here we are, because it just wasn't working.

 

Josh  18:11  

No, that's great. I can share some horror stories of our own business for the last 10 years. And we switched from one person hailing a system, and then we automated it. And then we moved to New technology and a new person, and it didn't transfer over. And then we're like, let's check on accounts receivable. And it was like, wow, there's a lot of money that we, you know, our system missed. And so it's really important to get into routine with that.

 

Matt  18:36  

I think what I find interesting is that many businesses come to us and I've got 50k 100k could be a lot more, usually, if they've not really had a system, and you move to a system, usually within 60 days, you know, 120 days max, we've got at least half of that money back in and we just keep it at this new level. So it's, it's really as night and day from not really having a process to having a process. So I think it's a no brainer, but you know, that's why we're talking I guess.

 

Josh  19:07  

yeah. Now, it really is. So anyone who's listening to this, and it has not checked, and their accounts receivable past two collections in a while, maybe this is a good time to do it, especially if you need some cash, right? It's always one of the things when I'm working with a client and looking for some money to help them over some rough spot or cash flow. It's always like, well, who owes you money? And it's usually a list and that's easy. It's easy money, you've already made the sales, you've already delivered the work, you tend to collect it. So it's quite pretty quick. Well, it's running a little bit low on time here. Why don't you tell us about a system in your business and I've gone through some of your personal life, we'd like to ask all of our guests about a system that they particularly like, or that's given them some benefit or efficiency for their clients or themselves. So do you have a system you want to share with us?

 

Matt  19:56  

Well, I suppose I've been pretty passionate about this accounts receivable. It took me a while to think about or actually realize what we'd built. And, you know, we've got some resources on our website that sort of go into this in a bit more detail. But effectively, we divided this into three parts, it's kind of a pyramid, if you imagine, at the bottom, you've got your process, which is the workflow and the steps you follow. Above that you've got your technology, which helps you to automate your process. And then on top, which kind of shopping is your person. And so we've kind of adopted this pyramid idea, and just help people understand and actually review the way that they're working, or whether they actually even have an accounts receivable system in the business, or whether it really just relies on a person, and I just turning up and throwing hours at it each day. And so yeah, I think that's probably what we've built. You know, I didn't realize that's what we were building. And when we started five years ago, but we've just been talking to customers looking at the problem from I've probably spent thousands of hours looking at, you know, accounts receivable problems and thinking about and going well, how do we solve this, and keep it solved so that people can go back to just doing what they love, which is, for me, it was building websites and talking to customers solving their problems, and not worrying about the fact where their cash was coming in. So yeah, I think it's been cool building it, but it's Yeah, it's been quite a journey to actually get it to something that we've got in a high level of confidence. 

 

Josh  21:39  

Yeah, well, I'm excited to watch your company grow, because this is definitely something that everyone needs if they don't have it already. And so it'll be fun to watch. watch it grow from here. So what's one thing that I didn't ask you that I should have asked you to train some of you?

 

Matt  21:54  

How did I come up with the name Debtor Daddy? Okay, that story? Well, actually, my father was an English teacher. And somehow I grew up probably loving alliteration. My web company was also alliterate. It's called practice plus, and it was. And for some reason, I spent two weeks jotting ideas and a notebook and just all kinds of combinations. And then one day I wrote down Debtor Daddy, and I just thought, yeah, that fits. My team has said, I'm not naming any other companies. I'm not allowed to, which is probably fair.

 

Josh  22:37  

Work for GoDaddy, right? GoDaddy? seems to be doing just fine.

 

Matt  22:41  

Yeah, people either love it or hate it, and they love it. They can become customers. Yeah, oh, it's catchy. No, I like the name. I think it's, I think it's smart. Alright, so where can people go find Debtor Daddy, if they want some help with their accounts payable? And they want some more cash in their hand? Yeah, well, that's debtordaddy.com. And if you go to debtordaddy.com/guides, there's a whole lot of resources, there's a lot more content on the things I've been talking about today. Self assessment forms are even a workflow design tool, so you can step through your process and actually start to design your ideal process. And yeah, my email is [email protected] So anyone can just reach out and ask me a question.

 

Josh  23:25  

Cool, very good. I'm gonna have my team, check it out and see how our system compares with yours and get some ideas. It's great. Great to do that. All right, back again, thanks for being on podcast today. And your Saturday, your Saturday morning there. So I appreciate you doing that. And everyone else, thanks for joining us, the podcast, whether you're catching it on live stream on Facebook, or iTunes or anywhere else, you're watching this YouTube, leave us a review. And then once a week, we pull one of those reviews out, and we mail a copy of that book right there behind me. So just take a screenshot of that other view, email it to info at workthesystem.com. And then once a week, we mail out a book. And hopefully you can be the lucky winner. And of course, if you want the free download of the book, you can go to work and get the system calm and get that as well. Otherwise, we'll see you all next week. Matt, thanks again. And we'll see you on Friday. 

 

Matt  24:15  

My pleasure. Thank you.

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