Think of great debtor management as the flip side of great customer service. Great customer service makes it easier for your clients to buy what you sell, nurtures strong customer relationships, and helps your bottom line.
Great debtor management makes it easy for clients to pay what they owe, maintains good customer relationships, and helps your cash flow.
Unlike great customer service, most people in business don’t enjoy following up with customers about unpaid debts. And perhaps because they don’t enjoy it and they’re busy anyway, they’re often not very good at it. Debtor control is often pushed to one side, as the team attend to more urgent or enjoyable tasks. It’s done ‘in the cracks’ when a systematic approach might achieve better results. This can lock up a lot of money in debtors that could be working for your business more dynamically.
Good debtor management supports healthy cash flow and that helps you drive the business further. The key ingredients? A good strategy, the right tools and having everyone in the team understand what’s needed and how important it is. These four tips can help:
- Stay on top of your debtors’ ledger. Review it often so you can act early with late payers. Know, on average, how long it takes for your debtors to pay you and set goals to keep that average as low as possible.
- Make sure your terms of trade are geared to your business and communicate them clearly to customers. If possible, ask customers to sign agreement to your trading terms.
- Have well-defined policies and procedures for credit, billing, and debtor follow-up.
- Get your team together for some training so everyone – whether they’re sales, accounts receivable, finance or reception staff – are on board with your debtor management strategies, understand their own role and have well-rehearsed techniques for dealing with customers.
If you’d like to review your debtor management strategies and achieve a healthier cash flow, we can recommend approaches and tools that might give you better results.