What is debtor management?

In business, you deal with debtors and creditors. A creditor is a person or company that has supplied goods or services to another person or company and expects payment at a later date. The person or company that received the credit is called the debtor. A debtor is a person or company that has yet to pay for products or services already delivered. Once paid by these customers, they are no longer called debtors. Debtor management is essential for the survival of your business. 

What is debtor management?

Debtor management or accounts receivable management is the management of your outstanding invoices. It involves sending invoices, monitoring payment deadlines, reminding customers of outstanding payments and taking collection measures when necessary. In short, everything to do with collecting money from your customers.

Why is debtor management so important?

Good debtor management is important to prevent customers from not paying their outstanding invoices or paying them late. In doing so, also try to find out the reasons why debtors do not pay their outstanding invoices. If you know why a debtor does not pay their outstanding invoice, you can respond appropriately. This will improve your debtors’ payment behaviour and thus your customer relationship.

If you do not have good debtor management, this can lead to financial problems. With good debtor management, you ensure that your customers pay on time and your business does not face economic difficulties.

Your debtor is also your customer

A common mistake with debtor management is that it is seen as something negative. However, your debtor is also your customer. It is important to deal with your debtors properly. By reminding your debtors of outstanding payments in a customer-friendly way and making any payment arrangements, you preserve your customer relationship. 

How do I ensure efficient and effective debtor management?

Efficient and effective debtor management starts with sending your invoices. Make sure your invoices are clear and contain all the necessary information, such as the invoice number, payment term and your bank details. Next, properly monitor the payment term. Send timely reminders if the payment term has expired. When doing so, make clear what the consequences of not paying on time are, such as interest and collection costs.

If payment is not forthcoming, take immediate action. Contact the debtor and try to reach a solution. Arranging a payment schedule is often a good solution. Here, in consultation with the debtor, an agreement is made about paying off the outstanding invoice. This will prevent things from escalating and preserve your customer relationship.

Automate debtor management

Keeping track of your accounts receivable can take a lot of time and energy. Fortunately, there are automated solutions available today, such as Payt, that can help you automate your accounts receivable management. This software offers various functionalities, such as simpler invoicing and checking the creditworthiness of your debtors. Moreover, the software has integrations with various accounting programmes to make your administration even easier. The software makes it possible to send invoices and reminders fully automatically, and to communicate with your debtors.

Good debtor management is essential for the survival of your business. It involves sending clear invoices and monitoring payment deadlines. If payment is not forthcoming, it is important to take immediate action and possibly involve a collection agency. Using Payt’s automated solutions will save you time and energy and ensure more efficient debtor management.