August 20, 2021Uncategorized
Proper management of your debtors is essential. A well-managed pool of debtors will see debts paid faster and lessen the build-up of bad debt in your business. Without proper management, you can expect some of your customers to become large burdens on your cash flow.
But management of your credit can be tough – as a business, your core function is to supply goods, not loans.
Keeping track of all the customers that owe you money, and ensuring your business has cash in the bank, may seem difficult at first, but by incorporating a few basic best practices into your business, you’ll quickly see a huge improvement to your accounts receivable.
6 tips for managing your debtors
1: Tackle your biggest debtors first
Start by reviewing your accounts receivables so you have a clear view of invoices that are still owed. Organize them by how long they are overdue and how much is owing.
Your accountant can do this for you, or if you use PencilPay, you can view this in seconds on your dashboard.
Once you’ve found your biggest offenders, it’s on to the next step.
2: Reach out to your debtors
Once identified, and before taking any major action, attempt to reach out to your debtors one final time.
Make sure you have all the correct contact details and even consider sending a letter of demand. You can do this yourself or get a debt collection agency to do this for you.
If you need a hand with constructing your own letter of demand, we have that covered for you with this letter of demand template.
3: Offer a payment plan
If after speaking to your debtors, you’ve found that they’re struggling financially, an effective option is to construct a customised payment plan for them to slowly pay off your debt. A lump sum might just not be possible for them at the moment.
Getting your customer on a payment plan helps in two ways:
- It gets money through the door
- It gets the relationship with your customer back on track
If you use PencilPay, making a customised payment plan that suits your buyer is as simple as a click of a button.
4: Review your credit terms
Your credit terms may no longer make sense for your business. Businesses change with time and as they grow, but despite these changes, we often find that businesses are still using old terms that do not serve them.
Review your terms and make any appropriate changes that better serve your business in its current state. You may want to include that you now accept credit card payments, offer payment plans or some sort of incentive for early payers. These kinds of flexible payment options can make a massive difference when it comes to managing your debtors.
5: Set up a payment gateway
You probably already have an automated payment reminder system in place. One of the best ways to get your debtors paying in a more timely manner is to simply include a payment option directly on your invoice reminders. Putting this front and centre leaves your customers with no excuse to not pay then and there.
6: Incorporate credit checks into your customer onboarding
When dealing with a new customer, taking the time to investigate what kind of buyer they are is essential. Make sure they haven’t got outstanding debt with similar suppliers or other businesses by performing a credit check.
Credit checks help you make better decisions and will protect you from customers that are troublesome with their payments.
Prevention is always better than the cure.
Better debtor management with PencilPay
If all of this seems like a lot of work and you’re interested in automating these tasks, PencilPay can help. PencilPay is a B2B platform that helps suppliers onboard buyers, perform credit checks, manage invoices and collect payments.