5 tips for managing your debtors
Some useful information in the management of these accounts receivable in order to guard against the risk of payment default.
You can operate with one credit limit per customer.
This limit will be the maximum debt a customer can have in your accounting. If he wants to buy more, your customer will have to pay his outstanding invoices first.
Set these limits according to information on the customer's creditworthiness:
- for a company, its financial health as revealed by its last three balance sheets and rules specific to the creditor;
- for consumers, a maximum limit of x because they cannot obtain meaningful information on their financial health.
It is also possible to set up this system for customers who have not honored their previous debts on time. It is also possible for these customers to limit the risk of non-payment by imposing an initial cash payment of all or part (deposit) of the sum.
A written agreement should precede any service or delivery. Doing so prevents subsequent misunderstandings.
This arrangement must be linked to a contract or general terms and conditions. In the possible case of dispute and -or- non-payment, it is indispensable that your customer signs this contract or that your customer accepts these terms and conditions of sale.
Useful commercial clauses exist so that the creditor can anticipate the non-payment of a debt by one of these debtors. They will not directly prevent non-payments from occurring, but they remain a way of preparing for a possible default.
Besides, your contract must specify the payment period. Indeed, the payment will be considered late from the day after the date mentioned.
Knowing about your business partners before you deal with them is imperative to proper management.
Today, some instruments make it possible to form an opinion on client companies' indebtedness, on their solvency, on the real powers and situation of their managers.
These instruments are mainly the commercial register, banks, and market information agencies.
Many companies systematically invoice at the end of the month. However, for isolated (non-recurring) services to private individuals or small businesses, it is advisable to invoice immediately after delivery or performance. Your customer will probably be quicker to pay or dispute, which is also useful to know quickly.
In general, commercial laws stipulate that you must invoice your client by the 15th day of the month following the month of delivery (or the service) at the latest.
A small tip to reduce your dependence on the post office: send the payment document in digital form so that it arrives directly at your debtor's premises. Send it per post afterward if required.
Do not leave the outstanding amount lying around. Take action immediately if your debtor exceeds the payment deadline despite the various measures in place.
Here are some possible actions
- sending a payment reminder;
- sending a formal notice;
- calling in a specialized debt collection company. It will quickly follow up with your debtor, initially through telephone contacts, payment reminders, and visits to the debtor's office.
Many means can be used, but the keyword is to act very quickly.