Top ten tips for improving your debtors – Tip seven

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Top ten tips for improving your debtors

In many businesses, the ability to manage cash flow is crucial to success and as a result of manual and repetitive processes, management of the debtors is often a ‘painful’ task.

The recent turbulent economic environment only adds to the headaches of a credit control team and the introduction of effective tools to improve the collections process is arguably more important today than at any time in recent history.

Effective credit control and query management should enable your business to;

  • Improve cash flow
  • Reduce debtor days
  • Increase customer service
  • Cut the cost of cash collection
  • Eliminate manual processes
  • Speed up the query resolution process


Late Payment Analysis

Late payment has always been a major problem in businesses – retention of printed cheques in the FD’s top drawer, only released when court action is threatened, was a common occurrence.  In recent years, more advanced systems of delay are prevalent, still resulting in the same situation; potential charges incurred on an overdraft or failure to attract interest on a positive bank balance.

The issue of whether you ‘dare’ raise late payment interest charges on a client is always a subject for debate within many businesses, the argument often being based on the relative importance of the client in question.  It may be argued that your practise should be consistent regardless of the size or importance of the client; however, in the real world it is important that you can distinguish.

Even if it is decided not to enforce late payment interest charges, the ability to ‘threaten’ with a detailed backup of offending invoices and a clear statement of how the charges are arrived at is a powerful tool in the credit controllers kit bag.  From an internal perspective the ability to report and analyse on potential charges is also a powerful tool in identifying exactly how much late payment is costing your business and how much could be recovered if interest were to be applied.

Imagine being able to report on a regular periodic basis the total cost of debt (interest related) by credit controller, business unit, geographic area, sector or indeed any business analytic.  How about a stage further and incentivising managers of specific areas of the business on reducing such costs?

Given a series of tools to support late payment interest charges, perhaps  ‘dare you’ to implement  is not the right question, ‘dare you not’ is probably more pertinent.

Liked this? Next week tip 8 focuses on Cash Management – cash to pending and direct debits


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