Take control of your debtors

by Gary Heywood on 30 January 2012

Having trouble getting the money you’re owed?  Not in control of your debtors?  Not sure what the state of your debtors are at the moment?

So, what are the early warning signs that you should look out for? Debtors not paying within the agreed terms, varying how they have paid in the past (i.e. if someone who normally pays in a month starts taking 6 or 7 weeks). You need someone who has an almost daily handle on which debtors are due, nearly due or overdue.

Here’s our tips for debtor management:

1. Set out clear policies for payment terms – covered in your customer contract. If you offer any credit agreement, this should be included.
2. Carry out a credit check on new and existing customers, especially if you’re thinking of extending their credit terms.
3. Issue invoices promptly.
4. If someone misses a payment date, start the collection process the following day. Don’t let it drag on.
5. Speak to your debtors – you need to understand why they have missed the due date.
6. If a customer is having a difficult time, agree a new schedule of payments.
7. Deal with everything case by case. Understand your customers, their sector and things that may affect their ability to pay.
8. Monitor your debtors daily.
9. Issue regular interim invoices for long term projects.
10. Don’t be afraid to stop giving credit if an amount is long overdue.

Just remember, it’s not rocket science – it’s about putting time in to stay on top of your cashflow – it’s crucial to your business. We can sit down and talk you through the finance available and help you to get it. Just don’t letter matters drift – get control of your cashflow now.

Have you found the issue of late payments in your customer base getting worse? Tell us what you think.

If you want any further information on this blog post please contact us.

Your CommentsComments2

Can I really believe this? Is Gary Heywood suggesting that if a business cannot collect its debts, then invoice discounting is the answer? Any business that does not bother to collect its debts is in the process of becoming a charity! Even if they would agree to take on such a slapdash company, an invoice discounter would charge exorbitant fees and if they cannot collect the money, that debt goes back to the supplier.
The only real solution is to do what some of these 10 points suggest (and they DON'T suggest invoice discounting!).
Know your customer, talk to him as soon as the payment is delinquent, and make him understand that you will help him through any short term cashflow difficulties (if you can), BUT you must be paid. Set up a payment schedule and, if it is not met, go legal. Just knowing this will happen can help to make sure you get paid.

Gerry Hooper on 26 February 2012

Respond to this comment

Thanks for this comment.

Definitely focus on our top ten tips for control of debtors. Much can be done by being organised but also firm with customers.

If, however, you have an inherent funding gap ie Your industry payment term for your sales is 60 days but your supplies eg salaries etc are paid 30 days then look to invoice discounting to solve the funding gap if there are insufficient cash reserves in the business.

The problem only gets worse if you are expanding.



Gary Heywood on 27 February 2012

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