Managing Debtors in your business can be a challenge but with some rules and procedures this can be made much easier. Obviously if you are not using cloud software to do this it will be more difficult to manage the process. We have put together a list of recommendations below for you to consider if you believe you could be doing a better job with Debt collection.
Managing debtors is a critical function in your business. By giving credit to your customers you make it easier for them to buy from you but it dies affect cash flow. It also offers the opportunity for some clients to take further debtor days. Here are a list of tips to have more effective debtor management.
- Have clear terms and conditions regarding your payment terms when managing debtors. If possible get a client to have a clear engagement and signature on a document or, of you are an online business have clarity in the terms and conditions and your users agreeing to same.
- Check limited companies on the Companies Registrations Office and ensure all filings are made and the company is compliant to the companies act before offering credit. If a company is non compliant or late with annual returns then they are more likely to generate bad debts.
- Perform a credit check where a large amount of credit is offered. Check Directors details. Get the Directors to sign an agreement that they understand your credit terms. Get three credit references where possible.
- Make a decision based on collected information if you are even going to offer credit to a prospect. Have a score sheet based on collected information.
- Have a written procedure on collecting and communicating invoices and statements when managing debtors. At a minimum statements should go out at the start of each month.
- Record notes on the Debtors file. If a client asks to be called the following Thursday at 3pm, make sure you are punctual every time.
- Make a decision to move bad debts on to a 3rd party who will guide you through the law regarding collecting the debt with a long term strategy. THere are many reputable companies who can assist here.