This is how you can prevent a customer from becoming a debtor
Unfortunately, every company has to deal with customers who do pay late or not at all or pay late. However, a good debt administration can significantly reduce the chance that a customer becomes a delinquent debtor. But how do you ensure efficient debtor management? You can read it here.
Advantages of efficient debtor management
An efficient debtor administration makes a direct contribution to profit. It enables you to write off less doubtful debtors. Doubtful debtors are customers of which it is not sure that they will ever pay their outstanding invoice. In addition, the company has better cash flow and available liquidity for purchases or investments. Moreover, a good debtor management contributes to a positive and professional company image. Finally, the customers that you no longer want as a company are more noticeable.
Preventing debtors is better than curing
Debtor management involves much more than urging the customer to pay an outstanding invoice. It is valuable to find out the reason for the non-payment. Perhaps a service or product has not been delivered or there is an administrative error on the invoice. Good debtor management is a complete process that consists of several aspects:
- Determine the legitimacy and creditworthiness of customers in advance
- Regular scanning and monitoring of customers for debtor risk
- Maintaining customer relationships
- Timely identification of overdue payments and complaints
- Reduce the total outstanding balance
- Prevention of depreciation
"Accounts receivable management involves much more than urging the customer to pay an outstanding invoice."
Drawing up efficient debtor management
In principle, drawing up a sound debtor management consists of two steps. You first determine your strategy. You then complete this with the appropriate procedures.
Step 1: Determine the strategy
- Which customers do you accept and under what conditions?
- Which customers do you monitor?
- To which customers do you say goodbye and when?
Step 2: Establish appropriate procedures
- What do your billing process and your invoice look like?
- When and how often do you send a reminder by telephone?
- When does a letter of formal notice follow and what does it look like?
- When do you engage a Debt Collection agency?
- When and starting from what amount are you going to litigate?
- Do you opt for outsourcing the debtor management, do you keep it in-house or do you want a combination of both?
Systems for efficient debtor management
Various systems are available to set up efficient debtor management. With the following systems you will get a good follow-up system for debtor management and you can make the right analyses and assessments.
- Acceptance system: determines manually or automatically whether a new customer is accepted based on credit information.
- Monitoring system: checks the entire portfolio for continuous insight into the creditworthiness of existing customers and suppliers.
- Billing system: sends invoices manually or automatically.
- Accounting system: books all debtors and creditors into one system, which provides the basis for insight into the cash flow and the debtor risk.
- CRM system: provides insights into customer relationships. It contains information about appointments, contacts and contracts with customers. Complaints can also be processed for better insight into the background of non-payments.
It is possible to automate all systems, to make use of Credit Control modules or to use a Credit Control system. However, not every customer is equal. Practice shows that a fully standardized process does not ensure optimal results. In many cases, an approach that is tailored to the individual is advisable.
