Debtors are customers who have yet to pay their invoices. Debtor management is the activity of ensuring that these debtors pay their outstanding invoices and bills. In other words, that they meet their payment obligations.
Setting up strict debtor management is an essential aspect of business operations. Unpaid invoices have a major impact on your company’s financial wellbeing, especially when larger amounts are involved.
You can make a good start as soon as you reach an agreement. By using relevant data, such as data derived from a credit check or trade information, you know in advance how profitable and solvent the company is.
The goal of debtor management is always the same: to receive your money from the customer within a predefined period.
What specific activities are involved in debtor management?
Among other things, the debtor manager or credit controller are responsible for the following:
Sending payment reminders
The debtor manager sends payment reminders to the debtor at predetermined times. At first, this can be just a letter or e-mail; later, a follow-up phone call can be made.
An agreement with a customer always contains a clear payment term. If this payment term has (almost) expired, the debtor manager will have to contact the debtor.
Regulate payment conditions
Depending on the customer, other payment conditions may apply. The manager must monitor these agreements carefully.
Customers sometimes have a reason for not allowing a payment to go through, for example when goods are damaged or when they are dissatisfied with the service provided. In this case, the manager should contact the customer and try to find a suitable resolution.
Draw up a payment plan
If the debtor cannot immediately make full payment, the manager proposes a payment plan, which must then be adhered to closely.
Give debtors notice of default
If the debtor does not respond to repeated payment requests, there is no other option than to appoint a collection agency, lawyer or bailiff.
Automating debtor management
Arranging and following up on payment agreements and payment plans is an extremely time-consuming process for the credit controller. By automating debtor management, these activities can be monitored in a very simple and efficient way. The right software will assist and inform you at all times throughout the process. And debtors in turn will also receive professional communication.