What is debtor management?
Accounts receivable management has long since ceased to be merely the follow-up of outstanding invoices. It is an extension of commerce and therefore so important. Optimising your credit management depends on the right people and the right tools.
What are the steps of efficient debtor management?
- Assessing the creditworthiness of your buyers
- Control and monitoring of existing customers
- Specific customer approach by customer type
- Policy on late payments
- Correct and prompt handling of disputes
- Reduction in DSO (= Days Sales Outstanding)
- Minimising write-downs on credit risks
In this piece, we will take a closer look at the first step, which is checking your customer's creditworthiness.
Benefits of good credit information
Credit information saves you time and money: you know who you are doing business with. Good credit information reduces the risk of non-payment. Check whether your potential buyers, both existing and new customers, are creditworthy before you do business with them. Prevention is better than cure.
Insight into customer portfolio quality
Understanding the quality of your customer portfolio is crucial for your daily debtor management, negotiations with existing and new customers and making strategic choices regarding your (future) working capital. For instance, if you are aware that there is a high probability that an important customer will be unable to meet its financial obligations in the foreseeable future, you can take timely action. That way, you will not be surprised by unexpected write-offs and lost sales. Valuable and price-setting information, in other words.
In addition, in your role as (potential) investor or portfolio manager, it is very important for you to have a good understanding of the quality of the debtors of companies you intend to invest in, or sell. This can help determine the buying or selling price of a participation or company.
More information
Xolv, in collaboration with the world's leading credit insurers, has a number of risk analysis tools developed for assessing the creditworthiness of companies worldwide. Want to know how to use these tools for your business? Then contact the specialists at Xolv.
