Get Paid On Time, EveryTime

Debtor management refers to business processes that enable your company to collect debts owed for products and services supplied. This ensures clients pay their invoices in a timely manner.

Effective debtor management processes have a key impact on today’s business environment. As such we will outline best practice guidelines to help our audience achieve a timely collection of payments by ensuring a simplified exchange between client and company.

Tip 1:

Implement a documented credit management policy. This means, establish trade terms that are understood by the whole company, such as ‘invoices are to be paid within 14 days’, and employ a software that issues automated reminders for the client – be that a few days before and/or on the due date.

 Tip 2:

Have a simple and clean looking invoice that is easy for clients to read, it should clearly state:

  • The total amount owing
  • Specific due date (rather than ‘due within 28 days’)
  • A clear description of the service/product you are invoicing for
  • Payment methods available, providing as many options as you can eg. credit card, direct debit, cheque etc.

Tip 3:

Perform a credit check on new clients, although there is no regulation enforcing this, it serves to minimise potential issues down the track. One option is use a credit bureau like Equifax to ensure a client’s credit repayment history is reliable; you can do this through small ad hoc costs per report or sign up to a subscription. In addition to this, taking the time to check out their physical space and/or website to assist in getting to know them better means you are less likely to be taking an unnecessary risk before performing the service.

What to do when invoices are not paid on time?

As above, best practice is to employ automated reminders days before the due date, the day of the due date and consistently after the due date to ensure effort has been made to notify your client.

Secondly, open communication (that is traceable) should be adopted early on to find out if your client has an issue with the payment they owe.

Thirdly, negotiation can be enlisted to resolve debt owing; this looks particularly favourable if you have offered this to the client prior to seeking legal action. As a final resort, a debt recovery service or lawyer can be employed to commence legal proceedings in order to recover withheld payments. The previous steps are required to prove you have done everything within your power to reasonably collect this debt in the first instance.



What is the biggest mistake business owners make when it comes to debtor management?

A common denominator, especially with small business owners is being ‘too soft’ when it comes to chasing payments from their clients. It is important to remember that your clients are also likely to be using suppliers for which they need their own invoices paid, so this concept is not new to them. If you are confident that you have provided a service in full for which you expect to be paid in timely manner, setting a clear expectation and having automated reminders can help to alleviate any hesitancy.

Best practice tips for the management of SME debtors can be summarised by implementing a streamlined approach that prioritises clear invoices, automated reminders and open communication with your clients.