Debtor management, a necessary evil

Let's start with the basics. And in this case, the basics consist of properly drafted general terms and conditions with an explicit clause that defines your company's standard payment term. Not unimportant: the general terms and conditions should also state the consequences if this payment term is exceeded. Send them along with every outgoing invoice, or mention on your invoice where the general terms and conditions are available to refer to in case of any conflicts.

First and foremost, an invoice should be clear. This may seem obvious, but in practice, it is not always so. However, debtors will respect a payment term better if the invoicing is clear and correct. If not, you risk ending up on the 'to-be-looked-at-if-I-have-time' pile, where your invoice might stay for a long time.

Last open door I want to kick at: put your payment date clearly on the invoice, in plain sight and in an absolute date (so not 'within 14 days').

Draw up a plan in which you determine how, when and with what message you will remind customers of outstanding invoices. Although we at Unikoo are all for the personal approach, it can pay off to standardise these actions. After all, this makes for a shorter thought process and, therefore, more mental space.

The prerequisite is that you think carefully about this fixed action plan. Your customers are dear to you, so you don't want to offend them. As a first reminder, you do not immediately threaten them with extra costs or a collection agency.

Here is an example of how you could go about it:

• 5 days after invoice date: 1st reminder by e-mail
• 10 days after the invoice date: 2nd reminder by e-mail
• 15 days after invoice date: registered mail
• 30 days after invoice date: telephone dialogue
• 45 days after invoice date: engage debt collection agency (Also decide with which party you will do this. Again, there are already many simple online platforms for this, such as Solva Check, Go Solid, Unpaid, etc.)

Efficient debtor management starts with efficient administration. If preparing your customer transactions requires hours of work, you will likely want to postpone your debtor management until there is plenty of time. And, of course, there rarely is. So try to make sure your administration is automated as much as possible. This way, you can pull up an overview of outstanding customers whenever you want.

Depending on who is doing the bookkeeping:

• If you keep the accounts internally, you’re already one step ahead because you have the overview of all customer transactions. Do you want to save a lot of time here? Then automate bank bookings via e.g. codabox.
• Fortunately, working with an external accountant does not mean you cannot track outstanding invoices. Many bookkeepers work with programmes enabling entrepreneur cooperation, such as Yuki, Exact Online, Octopus online... Agree with your bookkeeper that he will maintain your file on a regular basis so that your client list is always up to date when you start managing your accounts receivable.
• If your accountant does not work with an online accounting package (thus, you have no direct access to your accounts), pre-accounting software such as Billit, Clearfacts or Blue10 can save you from all kinds of excel files and manual follow-up. These online tools store your sales invoices and allow you to link to your bank, so the payment status of your invoices is automatically up-to-date. This way, you can easily automate accounts receivable management.

Do you not want to deal with debtor management yourself and still maintain a healthy cash flow? Then factoring could be a solution. Factoring is a form of debtor-financing where a bank or factoring company collects your outstanding invoices from customers and immediately pays you an advance of the outstanding invoice. Of course, this comes at a cost, but it can be a good solution in sectors where customers have extended payment terms or when you need quick pennies to pay subcontractors, suppliers or staff.

Last but not least, the 'customer experience' aspect also remains crucial in accounts receivable management. An invoice (or payment reminder) should not be an insipid dry document. In case of any payment problems, always try to find out and understand what’s causing the delay. Mutual respect and understanding strengthen the relationship and continue lasting cooperation. With the emphasis on 'mutual', because there should obviously be limits to your tolerance.

Would you still like more help with debtor management or would you rather outsource the task? Get into touch with finance@unikoo.be