Debtor management, a necessary evil

1. Good agreements make good friends

Let's start with the basics. And in this case, that basis consists of correctly drawn up General Terms and Conditions with a explicit clause that determines your company's standard payment term. Last but not least: the general terms and conditions must also state the consequences of exceeding this payment term. Please include them with each outgoing invoice or mention on your invoice where the terms and conditions are available to refer to in case of any conflicts.

2. The clearer the invoice, the faster the payment

First and foremost, an invoice must be clear. That may seem obvious, but in practice, we see that this is not always the case. However, debtors will better respect a payment term if the billing is clear and correct. Otherwise, you risk ending up on the 'to-be-looked-at-if-I-have-time' pile, and your invoice may stay there 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').

3. The debtor master plan

Draw up a plan to determine how, when and with what message you will remind customers about outstanding invoices. Although we at Unikoo are all for the personal approach, it can be worthwhile to standardize these actions. After all, this results in a shorter thinking process and thus more mental space.

The prerequisite is that you think carefully about this fixed step-by-step plan. Your customers are dear to you, so you don't want to offend them. So, as a first reminder, you're not going to immediately threaten with extra costs or a collection agency.

Here is an example of how you could approach it:

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

4. Optimize your administration

Efficient debtor policy 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.

5. Or not...

Do you not want to be involved in 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 a 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 a long payment period or when you need money more quickly to pay subcontractors, suppliers or staff.

6. And finally

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