Debtor Management

Managing your debtors is the key to your cashflow and ensuring your business can survive the ups and downs that naturally occur in any economy.

​Debtors management is not difficult but it requires business's to be vigilant and ensure that staff are following procedures.

​The key concepts of any debtors management policy will revolve around the following key points:

• where possible, always try and agree the price up front with your customer, this avoids any possible "bill shock";
• ensure that your customer is aware of your debtors policy or have them sign an engagement document that clearly states your debtors policy;
• before offering new customers payment terms, trial them on a cash-up-front basis for a few purchases or relatively short terms such as 7 days payment.  This gives you the opportunity to test their credit worthiness before offering them a larger account of longer payment terms;
  
• ​ensure that invoices are sent out promptly, preferably as soon as the service or good is supplied;
• offer customers numerous ways to pay - direct debit, credit card, Paypal etc
• once a debt become due have a policy for how it is followed up - many cloud based accounting programs or add-on apps can automate this process for you by sending out reminder emails, statements etc;
• one of the least enjoyable areas of managing your business is debt collection, but where debts become overdue and statements and reminder emails have not worked, it will require a staff member to follow up with a phone call to the customer;
  
• a lot of businesses are doing it tough, particularly outside of our capital cities, so payment arrangements are becoming more common - however as soon as a customer defaults on the payment arrangement be strict with them about the terms to repay the balance of the debt and ensure that future sales are paid in full up-front;
• where a customer has received a certain amount of friendly reminders (2 or 3 should be more than sufficient) and they are avoiding communicating with you then don't hesitate to engage a debt collection agency or solicitor to chase up the debt or if under $25,000 you can make a claim through the Queensland Civil and Administrative Tribunal;
• unfortunately bankruptcy and insolvency are rising problems, if this occurs then it is important that your debt is registered with the liquidator for any possible payment.  It may also require you to communicate with your creditors and setup payment arrangements to assist your cashflow;
  
• finally, where a new or even regular customer is starting to become one of your key customers, spend a few dollars with a credit agency to check their credit rating before offering them payment terms.
  

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​These are just a few key points of any debtor policy.  The important thing though is to ensure that your policy is documented, staff and customers are aware of the policy and you strictly adhere to it.

​If you need any assistance in documenting a debtors policy for your business then don't hesitate to contact FinBiz Solutions for futher information.

​Always remember - cashflow is the lifeblood of your business.