Top tips for Debtor Management
Debtors can be crippling for businesses but good debtor management practices can make all the difference, writes Adelaide accountant Tony Vroulis.
Cash flow is critical for businesses of all
sizes. When clients or other stakeholders are late with their payments, or
don’t pay at all, the pressure can build.
So what can you do to avoid debtor problems, or minimise their impact?
Implement a payment policy
Your company should have a policy that clearly outlines the terms and conditions for payments. This policy should be developed in line with your risk profile, which may need to be discussed with your accountant.
Your policy should include details of offerings such as payment plans, deposits and any discounts that may be available.
A well written payment policy will ensure that stakeholders, both external and internal, completely understand your expectations and takes away the excuse of “I didn’t know”.
Now that you have a policy, you must execute it. Communication is crucial.
Ensure that every payer (client or otherwise) receives and reads your payment policy. You may want to require a signature on the document to make sure they have fully understood the terms and conditions.
If there is an issue with a client or contact agreeing to your policy, seriously consider whether you want to risk continuing with the job!
Many debtor situations can be resolved before they become problems through great, ongoing communication.
As part of your communication strategy, provide an estimate of costs where possible. This prevents any “bill shock” or your clients not being prepared for payment.
Internal payment processes
Ensure that you have internal systems for managing debtors. This will enable your company to be proactive and resolve potential issues early. Internal systems also provide guidance and accountability for staff.
As part of your internal processes, set a regular time to review your outstanding accounts. This will enable you to be proactive, learn from trends and detect potential issues early.
Debt management services
Even with the best debtor management practices, debt issues can unfortunately still arise. Ongoing management can also be time consuming for businesses with complex needs.
Software solutions can take away much of the administrative and management pain. Platforms such as OneBox work in realtime to automate the entire collection process including notifications, facilitating easy debtor payment options and an audit trail.
To further protect your business, you should discuss credit insurance options with your accountant or financial planner. For the most difficult matters, it may also be necessary to connect with a reliable debt recovery agency or lawyer.
Debtors are serious business. Talk to the team at WVB or an experienced accountant about setting up the best debtor management practices for your needs, and see an immediate impact on your bottom line.