In doing so, these companies increase the risk of non-payment of receivables, worsen their cash position and miss opportunities. Because no money or less money means less business. This situation is also reinforced by the fact that obtaining credit from banks and financial institutions is becoming increasingly difficult. So companies have to rely more and more on their cash flow.
Consistent or not?
Good debtor management is - and yes, even we as specialists say this - absolutely no rocket science. Indeed, it is quite simple. Good accounts receivable management is simply about consistently following up on tasks set out in clear processes. But in that one word, consistent, often lies the problem. If no procedures or agreements about debtor management are in place, it will not work. And if no managers have been appointed and debtor management is "just done on the side", it has no chance at all.
Conditions of good credit management
Want to make strides in debtor management? Here are the prerequisites for good debtor management:
- The processes should captured are;
- Debtor management is a function to be performed daily;
- Someone should responsible are for debtor management;
- There should be interaction between the commercial department and the finance department;
- The management should the function of debtor management fully support;
- To monitor progress, there should be weekly reports be made;
- There should be good tools available to perform debtor management properly:
- Credit information;
- Credit insurance;
- Debt collection.
Accounts receivable management process
Have you created all those conditions? Then this is the process for successfully managing your debtors:
- Check the creditworthiness of prospects (before you put (too) much time into it);
- Leg delivery and payment terms firmly in place;
- Pass terms and conditions apply (include these on quotations, order confirmations and invoices);
- Confirm orders in writing (by e-mail);
- Save delivery notes;
- Put the payment period/due date on the invoice;
- Start immediately after the due date With debtor management;
- Take personal contact on (calling!);
- Confirm all appointments made by e-mail and strictly follow these agreements;
- Send not too many mails/letters;
- Keep the cycle short; send a official notice before handing over the collection to an external party;
- Report overdue receivables in a timely manner with the credit insurer if you are credit insured.
Faster payments
If you implement debtor management strictly and consistently, in the manner described above, you will find that your customers start paying faster. This reduces default risk and increases your cash flow. And that, in turn, makes it easier for you to seize new opportunities. In other words, you can ondernemen. And that's what you prefer, right?
Should you nevertheless still need extra working capital, excellent credit management will help you to attract financing based on accounts receivable. Yet another reason to put your credit management in order.
Xolv helps you optimise and improve your accounts receivable management!
