This post is one in a series designed to help SME businesses benchmark their business and create a best practice business improvement plan across all of their business processes. You can find the links to the full series here.
Why is it important to ensure that you have best practice credit and debtor management for your business?
Debtors are people or businesses who owe you money. Effective management of your debtors (often referred to as credit management) will help you get paid faster and prevent bad debts. It will also help you maintain a healthy cash flow.
Credit management includes:
- Collecting debts on time
- setting credit limits and payment terms
- making credit applications and credit checks
- enforcing a clear credit policy
- considering debtor finance.
How does your business measure up?
Here’s a checklist to help you determine how well your credit and debtor management processes stack up?
Approval of Work
- We always ensure that we have the appropriate customer approval for service performed and/or product bought
Knowledge of Debtor
- We have full knowledge about the individual or company we are giving credit to
Terms of Engagement
- We have clear terms and conditions on our sales contracts which include expectations for customer payment.
- Our customers are aware of consequences for late or non-payment
Invoicing and Payment
- We raise sales invoices promptly after completion of work.
- We encourage sales on the day and offer various payment options to assist this process
- We are aware and utilise cloud based debtor management system to assist with debt collection
- We have a clear process to follow up outstanding or disputed debts.
- We utilise a professional, full service debt collection firm when accounts are over 60-90 days (or earlier according to your terms) or to handle dispute resolution.