What is debtor management?
In a nutshell, debtor management is making sure outstanding invoices are received on time. When we discuss this in more detail, we are also talking about all the steps, the whole process from A-Z. From checking your debtor's creditworthiness beforehand to an unexpected collection procedure.
Why is good debtor management necessary?
If you have a tight and efficient accounts receivable management, a direct consequence is that your proceeds are in your account sooner: your cash flow increases. Therefore, the sooner you receive your outstanding receivables, the sooner you also have the opportunity to spend these funds.
Different phases of debtor management
Before closing a deal
Before the handshake on the deal, it is wise to check your customer's creditworthiness and payment morale. You can do this through credit reports. This will reduce the chances of surprises at a later stage considerably. If you have credit insurance, make sure the insurer has issued a credit limit on your customer by.
It is also important at this stage to make clear and unequivocal agreements on the payment term to be used. Discuss this specifically and confirm the agreement in writing along with your terms and conditions.
After providing goods or services
After providing goods or services
Make sure you draw up the invoice correctly and send it on time (you can find what should be on a complete invoice on the website of enterprise square. Send the invoice preferably on the same day as the delivery.
Keep your accounts receivable up-to-date and update them accurately. You will then be able to take timely action if necessary. In general terms with regard to your accounts receivable, it is important to establish what information is needed to gain an accurate understanding and monitor the process as tightly as possible.
A few days after sending the invoice
Contact your customer the day after sending the invoice. Check whether the invoice has been received properly and whether payment will be made within the deadline. This is the first concrete signal after which you can anticipate further steps to take.
A few days before the payment deadline expires
If payment is not received a few days before the deadline, it is wise to contact your customer. This telephone reminder often prompts debtors to make payment.
If payment is not made within the payment period
If payment is not made by the deadline, it is necessary to send debtors a reminder. These reminders prove essential to prevent further problems. Send a copy of the invoice right away so that your customer has all the details at hand to proceed to payment.
If payment is imminent
If a payment is not made, it is important to start collection proceedings through a collection agency. Do put your debtor in default before you do so.
As you read, good credit management is a process that requires constant attention. If you have tight and efficient debtor management, you will have an improved cash flow and therefore a healthier business!
Do you have little time to set up your accounts receivable management efficiently? Read here about the advantages of outsourcing your debtor management.
Want to know how to optimise your own debtor management? Then contact us at info@xolv.nl or 073 - 820 02 95. Our specialists will be happy to talk to you.
